Executive Summary:
This document presents the Indian government's response to a Lok Sabha question regarding the financial crisis in Kerala. It addresses the analysis of the crisis, proposed resolutions, and details of Kerala's borrowings and debt. The response includes data on financial assistance provided to Kerala from 2021-22 to July 10, 2025, and details of market borrowings and outstanding liabilities up to the current year.
Key Points / Main Content:
* **Analysis of Financial Crisis:**
* The fiscal performance of all states, including Kerala, is monitored by their respective State Legislatures.
* The State Government of Kerala is responsible for ensuring prudence in fiscal management and fiscal stability through the Kerala Fiscal Responsibility Act, 2003.
* **Union Government's Role:**
* The Union Government applies a common yardstick and follows the fiscal limits mandated by the Finance Commission for approving state borrowings under Article 293(3) of the Constitution of India.
* The Government of India provides financial resources to Kerala through Finance Commission Recommended Grants, Central Sector Schemes, Centrally Sponsored Schemes, and Special Assistance for Capital Investment.
* **Financial Assistance to Kerala (2021-22 to July 10, 2025):**
* Total assistance provided:
* 2021-22: ₹37,605 crore
* 2022-23: ₹34,796 crore
* 2023-24: ₹21,347 crore
* 2024-25: ₹19,149 crore
* 2025-26 (till July 10, 2025): ₹4,015 crore
* Assistance includes Finance Commission Recommended Grants, Central Sector Schemes, Centrally Sponsored Schemes, and Special Assistance to States for Capital Investment.
* **Kerala's Borrowings and Debt:**
* Details of Market Borrowings and Total Outstanding Liabilities of the Kerala government for the last 10 years and the current year (up to July 9, 2025) are provided.
* Total Outstanding Liabilities:
* 2015-16: ₹1,62,272 crore
* 2024-25 (BE): ₹4,71,091 crore
* 2025-26 (Projected as on 31.03.2026): ₹4,81,997 crore
Impact Analysis:
* Kerala State Legislature:
* Impact: Responsible for monitoring the state's fiscal performance and ensuring fiscal stability.
* Action Required: Continue to monitor and enforce the Kerala Fiscal Responsibility Act, 2003.
* Government of Kerala:
* Impact: Receives financial assistance from the Union Government and is subject to borrowing limits.
* Action Required: Manage fiscal policy within the framework of the Kerala Fiscal Responsibility Act and utilize financial assistance effectively.
* Union Government of India:
* Impact: Responsible for approving state borrowings and providing financial assistance.
* Action Required: Continue to apply the Finance Commission's recommendations for approving borrowings and provide financial assistance as per established schemes.
Key Entities Referenced
Kerala: A state in India experiencing a financial crisis.
Ministry of Finance: The Indian government ministry responsible for financial matters, answering questions about Kerala's financial situation.
Shri N K Premachandran: Member of Lok Sabha, posed the question regarding financial crisis in Kerala.
Shri Pankaj Chaudhary: Minister of State in the Ministry of Finance, provided the answer to the Lok Sabha question.
Kerala Fiscal Responsibility Act, 2003: Legislation enacted by the State Government of Kerala to ensure fiscal prudence and stability.
Finance Commission: An Indian constitutional body that recommends measures for financial resource distribution between the Union and States.
Constitution of India: The supreme law of India, Article 293 outlines borrowing powers of the State
Reserve Bank of India (RBI): India's central bank, providing data and reports on state finances, including Kerala's borrowings and debt.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF EXPENDITURE
LOK SABHA
UNSTARRED QUESTION NO. 162
TO BE ANSWERED ON MONDAY, 21st JULY, 2025
30 ASHADHA, 1947 (SAKA)
FINANCIAL CRISIS IN KERALA
162. Shri N K Premachandran
Will the Minister of Finance be pleased to state:
(a) whether the Government analysed the reasons for financial crisis in Kerala;
(b) if so, the details thereof and if not, the reasons therefor;
(c) whether the Government proposes to resolve the grave financial crisis in Kerala
such as debt burdens, fiscal deficit, restriction of borrowing capacity, etc.;
(d) if so, the details thereof and the action taken thereon; and
(e) the year-wise details of borrowings and debt of Kerala during the last ten years
and the current year?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) to (b) Fiscal performance of all States including the State of Kerala is monitored by the
respective State Legislatures. The State Government of Kerala has enacted the Kerala Fiscal
Responsibility Act, 2003.It makes the State Government responsible for ensuring prudence in
fiscal management and fiscal stability. This is to be done by progressive elimination of
revenue deficit and sustainable debt management consistent with fiscal stability, greater
transparency in fiscal operations of the Government and conduct of fiscal policy in a medium
term fiscal frame work.
(c) to (d) Union Government of India applies a common yardstick and generally follows the
fiscal limits mandated by the accepted recommendations of the Finance Commission while
exercising the powers to approve borrowings by the State under Article 293 (3) of the
Constitution of India. Further, the Government of India is also providing substantial financial
resources to State Governments including the Government of Kerala in the form of Finance
Commission Recommended Grants, Central Sector Schemes, Centrally Sponsored Schemes,and Special Assistance to States for Capital Investment. The assistance provided to Kerala
under these heads from 2021-22 to 2025-26 (till 10.07.2025) is given in Annexure-I.
(e) As per RBI report titled “State Finances: A Study of Budgets”and information provided
by RBI, year-wise details of Market Borrowings and Total Outstanding Liabilities of State
Government of Kerala during the last 10 years and current year are given in Annexure-II.
*****Annexure-I referred to in the answer of part (c) to (d) of Lok Sabha Unstarred
question no. 162 answered on 21.07.2025
The assistance provided to Kerala in the form of Finance Commission Recommended
Grants, Central Sector Schemes, Centrally Sponsored Schemes, and Special Assistance
to States for Capital Investment from 2021-22 to 2025-26 (till 10.07.2025)
(in Rs crore)
Heads 2021-22 2022-23 2023-24 2024-25 2025-26
(10thJuly,
2025)
Finance 22,171 15,382 7,246 2,532 558
Commission
Recommended
Grants
Central Sector 6,896 7,262 6,040 6,106 582
Schemes
Centrally 8,300 10,249 8,061 7,795 2,218
Sponsored
Schemes
Special 238 1,903 - 2,716 657
Assistance to
States for
Capital
Investment
Total 37,605 34,796 21,347 19,149 4,015Annexure-II referred to in the answer of part (e) of Lok Sabha Unstarred question no.
162 answered on 21.07.2025
Year-wise details of Market Borrowings and Total Outstanding Liabilities of State
Government of Kerala during the last 10 years and current year
(in Rs crore)
Year Market Borrowings Total Outstanding Liabilities
2015-16 15,000 1,62,272
2016-17 17,300 1,91,623
2017-18 20,500 2,16,499
2018-19 19,500 2,43,746
2019-20 18,073 2,67,585
2020-21 28,566 3,10,856
2021-22 27,000 3,60,037
2022-23 30,839 3,87,798
2023-24 42,438 4,26,020 (RE)
2024-25 53,666 4,71,091(BE)
2025-26 14,000 (till 9th July 2025) 4,81,997
(Projected as on 31.03.2026)*
*‘Budget in Brief 2025-26’ published by Finance Department, Government of Kerala.