The State of Kerala has brought its grievances against the Central government's alleged overreach in financial matters before the Supreme Court. The Pinarayi Vijayan-led government contends that the Centre's attempts to limit Kerala's borrowing capacity based on financial indicators are fallacious, exaggerated, and unjustified.

The State of Kerala, in an affidavit filed with the Supreme Court, asserts that the Central government cannot assume extra-constitutional powers under the pretext of public finance management. It argues against encroachment into the exclusive legislative and executive domains of the states, emphasizing that such actions cannot be justified by theories of necessity or potential abuse of powers by the states.

The dispute originated from an original suit filed by Kerala in December last year, expressing concerns about the Central government interfering with the state's authority to borrow and regulate its finances. The state argues that the Centre's actions could lead to a severe financial crisis, preventing it from fulfilling commitments made in its annual budgets.

In response to the state's plea, the Supreme Court issued a notice to the Central government in January, prompting a counter-affidavit from the Centre. The Central government, in its response, highlighted Kerala's dire financial situation due to off-budget borrowings and a compromised fiscal foundation. It stressed the importance of prudent public finance management as a national priority, with implications for the country's competitiveness and sovereign credit ratings.

The State of Kerala, in its reply, countered the Centre's argument by pointing out the Union government's own dismal record of reining in its debt. It argued that the Centre's attempt to make states liable for national debt crises is based on contrived and exaggerated fears, creating an imaginary specter.

The State's affidavit emphasizes that its fiscal and revenue deficit targets align with the recommendations of the 15th Finance Commission, rendering the Central government's reliance on Kerala's financial indicators irrelevant in the challenge to the constitutionality of the Centre's actions.

The Supreme Court is scheduled to hear the case on February 13.

Case: State of Kerala vs Union of India.