Kerala CM Accuses Centre of 'Economic Embargo', Cites ₹14,358 Crore Borrowing Cut for 2025–26

Kerala says retrospective accounting of KIIFB liabilities has slashed its borrowing headroom and stalled development financing.

Overview

Chief Minister Pinarayi Vijayan told reporters in Thiruvananthapuram that the Union government is restricting Kerala’s financial autonomy and weakening its development plans.
He said the Centre has retrospectively counted KIIFB borrowings and pension-linked liabilities as state debt from 2021–22, contrary to the RBI’s 1999 distinction between guarantees and loans.
Vijayan put the 2025–26 borrowing-limit reduction at ₹14,358 crore and cited further hits from a ₹3,323 crore deduction under the Guarantee Redemption Fund and IGST adjustments.
Kerala reported own-tax revenue rising from ₹47,000 crore in 2021 to nearly ₹80,000 crore, yet the state says approvals, allocations and settlements that support capital spending have been curtailed.
The CM referenced a detailed memorandum sent to Finance Minister Nirmala Sitharaman on October 9, flagged an expected ₹8,000 crore revenue loss from rate rationalisation, noted export losses of about ₹2,500 crore due to U.S. import controls, and contrasted this with NHAI debt not being counted as central liabilities.