The State of Kerala delivered a robust response to the Union government’s allegations of financial mismanagement, revealing startling statistics in a recent exchange before the Supreme Court. Kerala asserted that the Union government shoulders a staggering 60% of India’s total debt burden, while all states combined account for the remaining 40%.
This revelation emerged as a rebuttal to the Centre’s characterization of Kerala as “one of the most financially unhealthy States.” Kerala’s representation, led by advocate C.K. Sasi, highlighted that despite the Centre’s accusations, Kerala contributes a mere 1.70-1.75% to the overall debt of both the Centre and the states for the period spanning 2019-2023.
The contentious debate unfolded within the context of an original suit filed by Kerala, decrying what it perceives as undue interference by the Centre in the state’s legislative and executive autonomy. Kerala launched a scathing critique, accusing the Centre of implementing policies and legislative amendments aimed at pushing states towards financial ruin.
In response to allegations of “reckless borrowing” levied against states like Kerala, the State pointedly drew attention to the Union government’s own fiscal shortcomings. Kerala underscored the International Monetary Fund’s (IMF) findings, which revealed India’s alarming debt trajectory, projecting that the country’s debt could surpass 100% of its GDP in the medium term, positioning India among financially vulnerable nations.
Highlighting the Centre’s failure to adhere to Finance Commission recommendations, Kerala underscored the Union’s staggering borrowing of ₹11.80 lakh crore in the fiscal year 2023-2024, surpassing prudent limits outlined by the Fifteenth Finance Commission.
Moreover, Kerala criticized the Centre’s introduction of an “escape clause” in the Fiscal Responsibility and Budget Management Act in 2018, permitting it to breach fiscal constraints prescribed by law. Kerala argued that the risk of “reckless borrowing” is more pronounced at the Centre, given its control over institutions like the Reserve Bank of India and major public financial entities.
Addressing accusations of unproductive expenditure and poorly targeted subsidies, Kerala countered by highlighting the Centre’s substantial expenditure of over ₹3.25 lakh crore on subsidies alone in the current fiscal year. The State condemned the Centre’s attempt to discredit Kerala’s financial management, asserting that such allegations paint an incomplete and misleading portrayal of the state’s fiscal landscape.
The exchange underscores a broader contention between Kerala and the Centre over fiscal autonomy and the balance of power in India’s federal structure, underscoring the complex interplay between state and central authority in the country’s governance framework.