The State of Kerala told the Supreme Court on February 9 that the Union government accounts for approximately 60% of the total debt or outstanding liabilities of India.
The statement in the top court was a retort to an accusation by the Centre that Kerala was “one of the most financially unhealthy States”.
Kerala said all the States put together account for the rest of the 40% of the total debt of the country.
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“In fact, Kerala accounts for a miniscule 1.70-1.75% of the total debt of the Centre and the States put together for the period 2019-2023,” the State, represented by advocate C.K. Sasi, noted.
The exchange came in an original suit filed by Kerala criticising the Centre of undue interference, amounting to encroachment in the legislative and executive power of the State, to manage its own affairs. In an unvarnished attack, Kerala has accused the Centre of adopting policies and making amendments in law devised to push States to a State of penury.
‘Dismal record’
A note submitted by the Attorney General of India said “reckless borrowing” indulged by States like Kerala affects the credit rating of the country.
In response, Kerala pointed to the Union’s “dismal record of reining in its own debt”.
The State urged the court to go through the International Monetary Fund (IMF), 2023 Data Mapper which reveals “the glaring fiscal under-performance of the Union government in managing its own finances over the last decade. It said the IMF country report 2023 had warned that “India’s debt could exceed 100% of the GDP in the medium term”.
“This places India in the group of countries where the debt exceeds its GDP. This makes India financially risky and vulnerable to macroeconomic destabilisation. India debt is the highest among its peer group in the emerging market economies of the world,” Kerala highlighted.
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On the issue of “reckless borrowings”, Kerala said the Union has not conformed with the Finance Commission recommendations and was expected to close this year with a borrowing of ₹11.80 lakh crore in 2023-2024. “This was far beyond what it should have borrowed if it had complied with the recommendations of the Fifteenth Finance Commission,” the State said.
Further, the State referred to how the Centre had introduced an “escape clause” in 2018 in the Fiscal Responsibility and Budget Management Act, allowing it to breach fiscal limits prescribed in law. The State said the danger of “reckless borrowing” was more from the Centre than any State as the former “controlled” the Reserve Bank of India and major public financial institutions.
On the Centre’s accusation that it had indulged in unproductive expenditure or poorly targeted subsidies, the State hit back, saying the latest Union Budget figures show that the Centre had spent in excess of ₹3.25 lakh crore on subsidies alone in the current fiscal year.
The State said the note was an attempt to disparage Kerala’s financial management in a very myopic manner by representing an incomplete and misleading picture.
