The Supreme Court declined to provide immediate relief to the Kerala government in its lawsuit against the Central government challenging borrowing limits, redirecting the matter to a five-judge Constitution Bench. Justices Surya Kant and KV Viswanathan highlighted the constitutional nature of the case, particularly concerning the interpretation of Articles 131 and 293. The core issues include clarifying whether Article 293 grants States authority for external borrowing and the extent of the Centre’s regulatory power over this.
Given the absence of definitive rulings on Article 293, the panel deemed it appropriate to elevate the case to a higher bench. While considering interim relief, the Court leaned towards the Union’s stance, emphasizing the State’s borrowing discipline and potential future fiscal implications. The State’s borrowing, currently at 4.25 percent of Gross State Domestic Product (GSDP), could reach 7 percent with an additional Rs 25,000 crore.
The Centre highlighted the State’s borrowing trajectory and the implications of exceeding limits, signaling the urgency of the matter on the first day of the financial year. The decision underscores the complexity of fiscal federalism and the necessity for a comprehensive judicial review.
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