New Delhi: The All India Kisan Sabha (AIKS) on Monday strongly condemned the Union government’s decision to cut Kerala’s borrowing limit by Rs.5,944 crore, calling it an arbitrary and vindictive move that undermines federalism and severely weakens the state’s financial autonomy.
The organisation accused the BJP-led NDA government at the Centre of deliberately squeezing Kerala’s fiscal space at a time when the state is attempting to consolidate economic growth and expand social sector spending. The borrowing cut, it said, would directly hit public welfare programmes and have serious consequences for the people of Kerala.
Describing the move as a violation of the federal rights of states — a basic feature of the Constitution — AIKS said the decision interferes with essential government functions and slows economic activity. It called upon farmers, agricultural workers and the broader working population to intensify protests and mobilise public opinion against the denial of Kerala’s rightful share of resources.
The borrowing restriction comes amid a series of Union government policies that have compounded the state’s financial stress. Under the newly adopted Vikasit Bharat- Guarantee for Rozgar and Aajivika Mission (Gramin) VB-GRAMG Act 2025, the Union Government’s share in funding is set to fall from 90% to 60% increasing Kerala’s annual expenditure by Rs.2000 cr.
Kerala’s share in tax devolution has declined sharply over the years. While the 10th Finance Commission (1995-2000) allocated 3.874 per cent to the state, the current share stands at just 1.9 per cent. In comparison, Uttar Pradesh receives 18 per cent, Bihar 10.05 per cent, Madhya Pradesh 7.85 per cent, West Bengal 7.12 per cent and Maharashtra 6.31 per cent. Kerala is now among the states receiving the lowest share, resulting in an estimated loss of around Rs.27,000 crore in the current fiscal year alone.
Grants-in-aid from the Centre have also declined. As per the Kerala state budget, grants fell from Rs.27,377.86 crore in 2020-21 to Rs.22,171 crore in 2021-22.
The divisible pool has been systematically reduced through increased reliance on cess and surcharges, which under Article 270 of the Constitution remain entirely with the Centre. Revenue from cess rose from 6.4 per cent of gross tax revenue in 2011-12 to 17.7 per cent in 2021-22, amounting to Rs.4.78 lakh crore. Had this revenue been collected as regular taxes, states would have been entitled to a share.
Kerala enacted the Kerala Fiscal Responsibility Act, 2023, under Article 293, empowering the state legislature to regulate borrowing. However, repeated Union government interventions through executive orders have resulted in a cumulative resource loss of Rs.1.07 lakh crore between 2016 and 2023. The state has challenged this unilateral approach before the Supreme Court.
The statement further highlighted that Kerala now generates 78.7 per cent of its own revenue, compared to 52 per cent earlier, while states such as Bihar generate only 29.4 per cent. Despite this improvement, the Centre has sharply reduced financial support, it said.
Citing RBI data, AIKS noted that while states collect only 37 per cent of general government taxes, they shoulder 64 per cent of total expenditure. The organisation blamed the GST regime for eroding states’ taxation powers and called this centralisation an attack on federalism.
AIKS demanded restoration of states’ taxation rights through amendments to the GST Act and sought a 60 per cent share in the divisible pool, including cess and surcharges, instead of the current 31 per cent. It also criticised several recent legislations — including the Seeds Bill, Electricity Bill, Labour Codes, VB-GRAMG Act and National Cooperation Policy — alleging they weaken federalism.
