Lok Sabha Question No. 1890 (UNSTARRED), answered on 2026-02-11
Subject: Borrowing Limits, Fiscal Space and Planning Support to Kerala
Ministry: PLANNING
Asked by: Dr. Shashi Tharoor

## GOVERNMENT OF INDIA

## MINISTRY OF PLANNING

## LOK SABHA

## UNSTARRED QUESTION NO. 1890 TO BE ANSWERED ON 11.02.2026

## BORROWING LIMITS, FISCAL SPACE AND PLANNING SUPPORT TO KERALA

## 1890. DR. SHASHI THAROOR

[

Will the Minister of PLANNING be pleased to state:

- (a) whether  the  Government  has  taken  note  of  the  concerns expressed by the Government of Kerala regarding reductions in its  Net  Borrowing  Ceiling  for  the  January-March  2026  quarter and the impact of such limits on the State's ongoing development  and  welfare  programmes  and  if  so,  the  details thereof;
- (b) whether NITI Aayog or any other central institution has undertaken an assessment of Kerala's fiscal position including its debt levels, committed expenditure and development indicators while recommending or approving borrowing limits for the State and if so, the details thereof;
- (c) the details of the criteria currently used by the Union Government  to  balance  fiscal  discipline  with  State-specific development needs; and
- (d) whether  any  mechanism  exists  to  factor  in  unique  structural challenges faced by the States such as Kerala while formulating national planning and fiscal frameworks and if so, the details thereof?

## ANSWER

MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF STATISTICS AND PROGRAMME  IMPLEMENTATION; MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF PLANNING AND MINISTER OF STATE IN THE MINISTRY OF CULTURE

## (RAO INDERJIT SINGH)

- (a) Regarding deduction in borrowing consent to the State Government of Kerala (SGoK) under article 293(3) of the Constitution  of  India  during  the  last  quarter  of  financial  year (FY) 2025-2026,  it  is  mentioned  that  in  December,  2025,  while issuing  borrowing  consent  for  remaining  period  of  FY  2025-26 (January-March 2026), it was observed that the Comptroller and Auditor  General  (C&AG)  of  India  in  its  Audit  Report  on  Kerala State  Finances  for  the  year  2023-24,  published  on  09.10.2025, reported  Off-Budget  Borrowings  (OBBs)  of  SGoK  amounting  to Rs. 10,632.46 crore for the FY 2023-24.

However, the SGoK in the information submitted to the Department  of  Expenditure,  Ministry  of  Finance  has  reported that  the  total  OBBs  for  the  FY  2023-24  are  Rs.  4,687.79  crore only.  Therefore,  the  differential  amount  of  Rs.  5,944.67  crores, which was under-reported by the SGoK, was deducted from the eligible borrowing space of the remaining period of FY 2025-26. Subsequently, based on the clarification submitted by the State, borrowing  Consent  amounting  to  Rs.  1,700  crores  has  recently been restored out of the total deduction of Rs. 5,944.67 crores, as  replacement  borrowing  for  the  repayment  of  OBBs  made  by the State Government.

- (b) The Comptroller and Auditor General of India, in its report titled 'State Finances 2022-23', has undertaken a  comprehensive assessment of the fiscal position of States, including debt levels,

committed  expenditure,  and  other  development  indicators.  In addition,  the  Reserve  Bank  of  India,  in  its  report  titled  'State Finances: A Study of Budgets of 2025-26', has also assessed the fiscal position of all States, including the SGoK.

- (c) The  Department  of  Expenditure,  Ministry  of  Finance,  while exercising  the  power  conferred  under  Article  293(3)  of  the Constitution of India to allow borrowings to State Governments, applies  a  common  yardstick  and  generally  follows  the  fiscal limits mandated  by  the accepted recommendations  of  the Finance Commission. Accordingly, the Net Borrowing Ceiling of the  State  Governments  has  been  fixed  at  3  percent  of  the projected  GSDP  of  the  FY  2025-26.  Further,  the  States  are eligible for additional borrowing of 0.5% of Gross State Domestic Product  (GSDP)  for  certain  performance-linked  reforms  in  the power sector, over and above the Net Borrowing Ceiling.

Moreover,  to  assist  the  States  in  boosting  capital  expenditure, which has a higher multiplier effect and enhances the productive capacity of the economy, the Ministry of Finance has designed and  implemented  schemes  for  Special  Assistance  to  States  for Capital Investment (SASCI)/ Expenditure annually since 2020-21. Under these schemes, financial assistance in the form of 50-year interest free loan is being provided to States. An amount of Rs. 6,445 crore has been released to Kerala under SASCI from 202021 to 2025-26 (as on 04.02.2026). The loan provided under SASCI is over and above the borrowing ceiling of the State.

- (d) Assessment  of  financial condition of States including  own revenue, expenditure requirement and financial needs is done by the Finance Commission every five years. The Commission also recommends the quantum of devolution of central taxes & duties and grants to be made to States and the inter-se share of States in the devolution. Based on the recommendations of the Finance Commission,  the  Union  Government  has  increased  the  tax

devolution to States from 32% in the 13th Finance Commission period to 42% in the 14th Finance Commission period. The 15th Finance  Commission  also  maintained  same  level  of  devolution after adjusting 1% for Jammu and Kashmir.  Further, some States including  Kerala  were  also  provided  Revenue  Deficit  Grant  to bridge the gap between State's expenditure and revenue.

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