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Debts of states affect credit rating of country: Centre to SC on curbs imposed on Kerala’s borrowing


He said while giving this permission, the Union government keeps in mind the overall objectives of macroeconomic stability of the country as a whole and fixes a borrowing limit for the State seeking its permission, under Article 293(4).

The borrowing limits of States are fixed in a non-discriminatory and transparent manner guided by the recommendations of the Finance Commission, he said.

The top court had earlier asked the Centre to respond in two weeks to a suit by the Kerala government accusing it of interfering in exercise of its “exclusive, autonomous and plenary powers” to regulate the state’s finances by imposing a ceiling on net borrowing.

On January 12, the top court had sought the Centre’s response on the suit filed by the Kerala government.

In an original suit filed under Article 131 of the Constitution, the Kerala government has said the Constitution bestows fiscal autonomy on states to regulate their finances under various articles, and borrowing limits or the extent of such borrowings are regulated by a state legislation.



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