Kerala trying to mask failures, Centre tells SC on State’s plea over borrowing limit.


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.


  • 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.

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