Kerala pushes for Rs 7877 crore extra borrowing amid fiscal crunch before Onam

New Delhi: Kerala has urged the Union government to allow it to borrow an additional ₹7,877.57 crore and restore ₹4,288.16 crore deducted from its funds, citing the impact on its fiscal health ahead of the Onam festival.

In a memorandum submitted to Union Finance Minister Nirmala Sitharaman on Monday, State Finance Minister K N Balagopal said the deductions have significantly affected the state’s ability to meet essential expenditures. He noted that Kerala’s debt-to-GSDP (Gross State Domestic Product) ratio has improved to 34.13 per cent in 2024–25 from 38.47 percent in 2020–21, but the fiscal space remains tight.

Balagopal pointed out that Kerala is the only state to bear 25 percent of the land acquisition cost for national highway widening, with funds raised through state borrowing. He requested that this expenditure be considered an additional capital investment for the highways, and that the state be allowed to borrow ₹6,000 crore this financial year without conditions, over and above the Net Borrowing Ceiling fixed for 2025–26.

The minister also sought approval to raise ₹1,877.57 crore through Open Market Borrowing, citing variations in GSDP.

Among other demands, Kerala has asked for the restoration of ₹3,323 crore deducted due to non-contribution to the Guarantee Redemption Fund (GRF), and ₹965.16 crore deducted in April 2025 to adjust for a shortfall in the Integrated Goods and Services Tax (IGST) balance as of 31 March 2025.

“This deduction has adversely affected the resource position of the state. Therefore, it is requested that the reduced amount of IGST may be restored to the state in the current financial year,” the memorandum said.

PTI inputs