Kerala’s deepening fiscal crisis and the way ahead

Kerala’s deepening fiscal crisis and the way ahead

As the Supreme Court resumes hearing on Kerala’s plea against the Union government over borrowing limits, experts weigh in on ways for Kerala to come out of the fiscal crisis.

Four days after defaulting on salary payments to more than half of the 5.15 lakh employees, Kerala government began crediting them on Monday, March 4, but only after setting a daily withdrawal limit of Rs 50,000. Finance Minister KN Balagopal attributed the failure to disburse salaries to a technical glitch and said that the limit was imposed to prevent the online system from collapsing but a section of employees hit the street to protest against the government.

The defaulting on salaries is a pointer to the severity of the financial crisis that the state has been going through. Kerala government has blamed the Union government of choking it financially by depriving Rs 57,400 cr, by way of central transfers and loans, which it is eligible for. 

Stressing on the urgency of the situation, senior advocate Kapil Sibal told the Supreme Court on February 19, "If it goes on till the end of this year, we will default. They can also declare financial emergency under the Constitution. The idea is clear when the Centre refuses to release what the state is entitled to.” The court was hearing the plea filed by Kerala in December against the 'undue interference' of the Union government in its financial affairs. "All states in India will get 5000 crores for power sector reforms, but they are not giving Kerala this money just because we have filed this suit. This is not cooperative federalism," Sibal said.

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