The story so far: The Supreme Court on Monday declined any interim relief to Kerala in its suit seeking that the Union government relax its borrowing restrictions to enable the State to borrow additional funds during the current fiscal year. It also refused to stay the operation of two letters issued by the Union Finance Ministry last year and certain amendments made to the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, in 2018 that imposed borrowing cap restrictions on States.
Kerala moved the top Court last year accusing the Union government of arbitrarily imposing a Net Borrowing Ceiling (NBC) on the State, which brought it to the brink of a financial crisis as it could not no longer pay salaries and pensions or fulfil other essential financial commitments.
A bench of Justices Surya Kant and K.V. Viswanathan also referred to a Constitution Bench the larger questions of law raised in the suit, such as whether Kerala had an “enforceable right” under Article 293 of the Constitution to raise its borrowing limits from the Union government and other sources.
