Little over a fortnight ago, the Supreme Court of India declined Kerala’s request to prevail upon the union government to relax the cap imposed on their annual borrowings. The state which is staring at an unprecedented financial crisis is desperate for extra funds—even if they accrue as borrowings and add to their future debt burden.
Given that it is general election season and the fact that the Left Democratic Front (LDF)-ruled Kerala is politically opposed to the ruling Bhartiya Janata Party (BJP)-led National Democratic Alliance (NDA) at the centre, has given the entire dispute a political hue.
While the state believes that it has the right to borrow, the centre says it must be within limits—defined by standard fiscal parameters.
To unpack this vexing face-off and its impact on cooperative federalism, StratNews Global spoke to Ashima Goyal, a well-regarded economist. She is a professor at the Indira Gandhi Institute of Development Research and a member of the Reserve Bank of India’s Monetary Policy Committee.
Anil Padmanabhan has been a journalist for the last 36 years. He has worked in various capacities in several publications including Afternoon Despatch & Courier, Press Trust of India, Business Standard, Mint and was based in New York for India Today. He was a Nieman Fellow in 2001. He tweets at @capitalcalculus.
