Kerala Finance Minister K. N. Balagopal has stated that the state’s escalating financial concerns are primarily a result of a sharp and disproportionate decline in the share of funds transferred from the Union government.

Key Allegations and Figures

• Shrinking Central Share: Balagopal claimed that Kerala’s share of central funds has dropped significantly in recent years. He stated that when he took office, the state was receiving around 34 percent of the Center’s share, which has since fallen to nearly 25 percent.
• Declining Divisible Pool Share: The Minister highlighted that Kerala’s share from the central divisible tax pool has steadily reduced, falling from 3.875% under the 10th Finance Commission to just 1.925% under the 15th Finance Commission.
• Fiscal Constraints: The financial difficulties are compounded by the cessation of GST compensation and the tapering of revenue deficit grants. The state is also facing difficulties due to restrictive conditions imposed on Centrally Sponsored Schemes (CSS) and constraints on its borrowing limits.
• Disparities with Other States: The Finance Minister contrasted Kerala’s situation with that of other states, noting that states like Bihar and Uttar Pradesh receive significantly higher percentages of their revenue from central taxes and grants.
• Call for State-Specific Approach: Balagopal argued that a “monolithic thinking” about development is impractical, and the Central government must adopt a state-specific financial approach that recognizes Kerala’s unique developmental progress (particularly in sectors like education and healthcare) and addresses specific needs like managing a rapidly aging population and coastline erosion.
• Supreme Court Action: The state government has moved the Supreme Court, challenging the central government’s implementation of a Net Borrowing Ceiling (NBC), arguing that such restrictions infringe upon the state’s constitutional powers and threaten its financial stability.
• Defending Fiscal Federalism: The Minister reiterated that the state is not opposed to Central schemes but is against the conditionalities that undermine state autonomy and curtail its own development path. He affirmed the state’s commitment to defending fiscal federalism.