CAG flags Kerala’s borrowing predicament (opens original article in a new tab)

The CAG report reveals that Kerala's borrowings are predominantly used for debt repayment and revenue expenditure, with minimal allocation to capital projects, raising concerns about the state's fiscal health and long-term growth.

• CAG report highlights that 86% of Kerala's 2024-25 borrowings went to repayment of previous debt and 9% to revenue expenditure, leaving only 5% for capital spending.
• Kerala's capital expenditure from borrowings has fluctuated between 5% and 12% over the past decade, with the CAG criticizing the trend of using loans for current expenses rather than long-term assets.
• The White Paper on Kerala's fiscal health warns that excessive debt use for committed expenditure and debt servicing weakens growth potential and creates a fragile fiscal situation.