THIRUVANANTHAPURAM: The state government formally demanded the Centre to raise the borrowing limit of states in the current financial year to 5% of the Gross State Domestic Product (GSDP). The entire borrowing amount should be kept unconditional, Finance Minister K N Balagopal said in a letter sent to Union Finance Minister Nirmala Sitharaman on Wednesday.
“Kerala’s economy has been under continuous stress since 2018. The massive floods in 2018 and 2019 wreaked havoc in most of the districts. The Covid outbreak in early 2020 exacerbated the pressure on the economy. The impact of the second wave-induced lockdown has adversely affected the economic and social well-being of all sectors of society,” he said in his letter.
As a rule, the Centre has put an annual borrowing ceiling of 3% of GSDP. Considering the Covid situation, the limit was relaxed to 3.5% last year. States that could satisfy a set of stringent conditions devised by the Centre were allowed to borrow 1.5% more. Kerala was among the states which borrowed 5% of GSDP last year by adhering to the conditions set by the Centre.
Balagopal said putting such conditions on the state wouldn’t be fair this year. “The borrowing should be kept entirely unconditional given that the GST compensation is again being provided through borrowing (under the special window) in the current year and the borrowed amount will be entirely the liability of the state government,” said the letter.
G2,96,916-CRORE DEBT
As per the economic review for 2020-21 published by the state planning board, the outstanding public debt of the state in 2020-21 was J2,96,916 crore. This is 36% of the gross domestic product. The per capita debt of Keralites was J90,000.