Kerala rejects Centre’s Rs 5,000 crore package

Kerala’s original suit against the Union under Article 131 of the Constitution challenges the government’s norms on borrowing limits, highlighting the unique financial landscape of the state.

Defending its spending patterns, the state emphasized its investments in key sectors such as health and education, which contribute to improving its human development indices.

In its petition filed in December 2023, the Kerala government alleged that the Central government’s decision to impose a limit on the state’s borrowing has led to accumulation of unpaid dues and will result in severe financial crisis. Following this, the state failed to pay salaries for the month of February to many of its employees.

In a note filed in the court, the central government claimed that it had to limit Kerala’s borrowing limit to protect macroeconomic stability. Attorney General R. Venkataramani argued the potential effects of uncontrolled borrowing by a state on the country’s credit rating and overall financial stability. The Union’s stance was based on the premise that macroeconomic concerns required centralized monitoring to prevent fiscal recklessness by the state.

Kerala has rejected this saying that the Constitution grants autonomous rights to states over their public debts. The state has challenged the Union’s interpretation of Article 293, saying that the consent mentioned in the Constitution is meant to protect the Union’s position as a creditor and does not give it broad powers to regulate the State’s borrowings. Is.

The state’s plea seeks lifting of the borrowing ban, saying such central interference compromises the federal integrity of the country. Kerala, which led the legal challenge against the Centre’s borrowing limit, claims this has led to retaliatory measures, including threats to withhold necessary funds unless the case is withdrawn.