Kerala's Debt Strategy: A Financial Balancing Act
Kerala Finance Minister K N Balagopal announced a shift in the state’s debt trajectory, with total liabilities rising more slowly than projected. Despite constraints imposed by federal borrowing limits, debt-to-GSDP ratios have improved. Balagopal credits controlled borrowing and economic growth, while previously criticizing Congress-led governance for unsustainable borrowing practices.
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Kerala's fiscal scenario has witnessed a significant shift as its total public debt no longer mirrors the previous pattern of doubling every five years, according to state Finance Minister K N Balagopal. For instance, while liabilities stood at Rs 78,673 crore in 2010–11, they were anticipated to surpass Rs 6 lakh crore by 2025–26. However, they are now expected to be Rs 4.65 lakh crore, attributed mainly to borrowing constraints from the central government.
Finance Minister Balagopal emphasized that this reduction in debt growth is also aligned with a responsible borrowing strategy. Kerala borrows in proportion to its economic growth, adhering strictly to the Fiscal Responsibility Act—only borrowing with Central government approval under Reserve Bank of India rules. In notable contrast, Kerala's debt-to-GSDP ratio, an indicator of economic health, continues to improve, falling from 38.47% in 2020-21 to 34.2% in 2023-24.
Critically looking back, Balagopal pointed fingers at past Congress-led governments for higher debt growth than economic expansion. He outlined how under UDF governance, borrowing outpaced GSDP growth, thereby stressing the importance of the current administration's prudent financial management.
(With inputs from agencies.)
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