The Kerala Government has told the Supreme Court that it was the Union government which accounts for 60% of the total debt in the country while all states together make up the remaining 40%. The statement came in response to the centre’s argument that Kerala was one of the most financially unhealthy states in the country and blamed the mismanagement of the state government for its financial crisis.
The Kerala government had filed a suit against the Union government for allegedly interfering with the states’ power to borrow and regulate its own finances. The petition had alleged that the Union government's actions could lead to a financial crisis.
“Kerala accounts for a minuscule 1.70-1.75% of the total debt of the Centre and the States put together for the 2019-2023 period. Therefore, the premise that borrowings of the Plaintiff State can destabilise the economy is exaggerated,” the reply added, according to a LiveLaw report.
The reply affidavit further stated that the Union government should not violate or encroach upon the plenary powers of the states under the pretext of 'sound public financial management’.
“The Constitution does not confer any power to the Union government to control the debts of a state. The Union government itself has a dismal record of reining in its own debt, and has grossly underperformed in its management of public finances – even in comparison to several Emerging Countries,” it added.
The Kerala government further criticised the Union government for comparing the state's fiscal parameters with the average of all states by calling it unfair and irrational. “Kerala makes higher budgetary allocations for health and public education than other states. It is a result of a higher human development index. Kerala’s fiscal deficit and debt are directly an outcome of the state investing heavily in the health and education of its people. The threat to the macroeconomic stability of the country is posed by the economic and financial policies pursued by the Union and not by the states," said the affidavit.
A bench of Justices Surya Kant and KV Viswanathan is set to take up the matter on February 13 and decide on Kerala's interim relief application against the Union government for restricting the state's borrowing capacity.