Kerala's borrowing power may shrink in effect of Union Budget proposals

Thiruvananthapuram: Kerala's borrowing powers may be harmed by the Union Budget measures, notwithstanding the state's dire financial situation. According to the lending policies announced by the Central Government in the Budget, the Kerala Government's loan availing limit will be decreased by at least Rs 4,500 crore next year.

Kerala can borrow up to 4percent of its Gross State Domestic Product (GSDP) without any conditions in the fiscal year 2021-22, and up to 0.5 percent on the condition that the state implements the Central Government's proposed electrical reforms.

The State has requested the same 4.5 percent cap for borrowing in the next fiscal year, which begins in April 2022, but the Centre has not reacted positively. As a result, the State will only be able to borrow 3percent without conditions and 0.5 percent with conditions in the coming year. As a result, the loan amount limit would be reduced by around Rs 4,500 crore.

Kerala's borrowing limit was increased by Rs 2,261 crore by the Union Finance Ministry in January 2021. This was in response to the Centre's execution of policies aimed at improving the ease of doing business. Seven other states' borrowing limits were also increased on the same grounds.

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