The plea said “Constitution bestows fiscal autonomy upon States to regulate its finances under various articles” and “States have been exercising these powers to prepare and manage their Budget, all these decades post-Independence”. The Kerala government has approached the Supreme Court against the Centre imposing a ceiling on the amount it can borrow, saying this had “brought the operation of” its “budget… to a grave crisis” and was violative of the principles of fiscal federalism. In an original suit filed under Article 131 of the Constitution, Kerala said “unless the Net Borrowing Ceiling, as fixed by the Kerala Fiscal Responsibility Act, 2003, based on which” its “budget… has been drawn up and approved by the Legislature is restored”, the State “is legitimately apprehensive that its treasury operations will be halted or starkly curtailed. This is a dire situation looming ahead, the immediate consequences… will be catastrophic”.

It added that “the reduction in borrowing limits will have an extremely deleterious impact and long-term economic damage to the State which will be irremediable in the short or even in the medium term. Reversing the anticipated negative financial and economic consequences of the measures imposed by the defendant may take a very long period and protracted and costly efforts”. The plea said “Constitution bestows fiscal autonomy upon States to regulate its finances under various articles” and “States have been exercising these powers to prepare and manage their Budget, all these decades post-Independence”. It said that “the ability to determine the borrowing of the State in order to balance the budget and make up the fiscal deficit is exclusively within the domain of the States” and added that “if the State is not able to borrow to the extent required based on” its budget, “the State would not be able to complete its State Plans for the particular financial year. Therefore, it is essential for… the State and the people of the State that the State is able to exercise its constitutional rights… and its borrowings are not impeded in any manner”. The suit said the Finance Ministry by amendments made to Section 4 of Fiscal Responsibility and Budget Management Act, 2003… imposed a Net Borrowing Ceiling on Kerala, thereby limiting its borrowings from all sources, including open market, further reducing the Net Borrowing Ceiling by including aspects into the “borrowing” of the State which, otherwise, are not “borrowings” as contemplated under Article 293 of the Constitution and by imposing conditions that curtail the “exclusive constitutional powers” of the State.