Syllabus:GS-II
Subject: Federalism
Topic: Financial relations
Issue: Financial Relations between state and centre
Context: The State of Kerala moved the apex court challenging the Ministry of Finance directives which lowered the borrowing limit of the state.
Synopsis:
- The petition was filed under Article 131 (Original jurisdiction of the Supreme Court) which deals with disputes between states or between centre and states.
Financial control of centre over states:
- Article 293: The centre can impose limits upon the borrowing limits of the state.
- FRBM Act,2003: Empowers the centre to set borrowing limits for states to ensure specific fiscal deficit and debt-to-GDP ratio targets.
Grants-in-Aid to the States: Statutory Grants(Article 275) based on Finance Commission recommendations and Discretionary Grants(Article 282) by the discretion of centre.
