Stalin Writes To Pinarayi Vijayan, Extends Support to Kerala's 'Fiscal Federalism' Commitment

Tamil Nadu CM Stalin also offered cooperation in the endeavor and expressed readiness to collaborate and coordinate efforts to tackle the challenge

Tamil Nadu Chief Minister MK Stalin penned a letter to his Kerala counterpart, Pinarayi Vijayan, expressing full support for the Kerala government's dedication to preserving fiscal federalism. He also offered cooperation in this endeavor and expressed readiness to collaborate and coordinate efforts to tackle the challenge.

In the letter, Stalin highlighted that public debt for financing state expenditure falls under the exclusive jurisdiction of state legislatures as per the Indian Constitution. However, he criticized the Union Government for misusing its powers under Article 293, which requires prior consent for state borrowing.

He said, "The prior consent from Union Government, mandated by this section, has been converted into a restrictive tool to limit deficit financing beyond the limits prescribed by the State FRBMs."

"As a result, the fundamental principle of fiscal federalism envisioned by the Constitution makers is result, the fundamental principle of fiscal federalism envisioned by the Constitution makers is under grave threat," he said.

Listing steps that have caused a significant dent in mobilisation of funds for State initiatives, Stalin said, "For the year 2023-24, the Union Government has fixed the GSDP growth for calculating the net borrowing ceiling at a mere 8%, despite the state consistently achieving around 15% nominal growth in the last two years."

This has resulted in a loss of Rs.6,000 crore in borrowing space in the current year, he said.

Further, Stalin criticized the Union Government for discriminatory actions particularly in light of the constraints imposed on States' fiscal autonomy by GST implementation. He highlighted Tamil Nadu's substantial annual revenue shortfall of Rs. 20,000 crore compared to the pre-GST period due to the Union's reluctance to provide compensation.

"A revenue shortfall of Rs.20,000 crore per annum is being faced by the Government of Tamil Nadu in comparison to the pre-GST regime and the Union has been refusing to extend the compensation regime. In summary, the intent seems to be aimed at crippling States’ ability to raise resources and fund crucial developmental initiatives as per their policy priorities. This needs to be resisted by likeminded progressive states," he said.