On Friday, Chief Minister Pinarayi Vijayan declared that Kerala had formally informed Union Finance Minister Nirmala Sitharaman that the Central government’s current fiscal policies are jeopardizing the state’s progress and severely impacting its extensive social security system.
He highlighted several factors contributing to Kerala’s financial strain: recent GST rate changes, the U.S.’s high tariffs on key Kerala exports like seafood, spices, and agricultural goods, federal restrictions on the state’s borrowing capacity, and significant demands from the Centre for IGST revenue recovery.
Vijayan stressed that this dire financial situation threatens the timely delivery of essential public services and impedes critical infrastructure development projects across the state.
Chief Minister Vijayan estimated that the state has suffered a staggering revenue loss of ₹9,765 crore due to the Centre’s fiscal strategies. He pointed out that the federal government has additionally slashed Kerala’s borrowing limit by ₹5,200 crore. Furthermore, a ₹4,700 crore cap has been placed on ‘off-budget’ borrowings, meaning funds raised by the Kerala Infrastructure Investment Fund Board (KIIFB) for vital infrastructure projects are now counted towards the state’s public debt.
Vijayan firmly stated that these punitive measures were not a result of any financial mismanagement by Kerala. Instead, he argued, “They are the fallout of decisions taken outside Kerala’s fiscal, administrative, and fiscal jurisdiction,” suggesting external policies are unfairly penalizing the state.
The Chief Minister urged the Centre to immediately reinstate Kerala’s borrowing limit as ‘interim relief’ and demanded the repayment of ₹965 crore that was collected from the state as IGST recovery. He also requested that any decision to further reduce Kerala’s borrowing capacity be postponed until the next financial commission is established.
Vijayan further emphasized the need for the Centre to permit Kerala to borrow an immediate ₹6,000 crore. This fund is crucial for the state to fulfill its commitment to the Union Ministry of Transport, which involves covering 25% of the land acquisition costs for national highway development projects.
Vijayan clarified that these requests were not for special concessions but rather essential rectifications vital for Kerala’s fiscal stability, ongoing development, and the preservation of its comprehensive social security net.
Concluding his remarks, Vijayan described his discussions with Minister Sitharaman as positive, stating, “She promised that she would consider Kerala’s request with utmost gravity.”