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The SC will examine if the states have an enforceable right to raise its borrowing limit over the cap fixed by the Centre.
- It will also examine if such restrictions are in conflict with the role of RBI as public debt manager.
- The reference to a Constitution Bench was made earlier this year on the basis of an original suit filed by Kerala government.
Impact of NBC on States
- Violation of Principles of Federalism : Fiscal decentralization is an important aspect of federalism.
- Fiscal Decentralization refers to devolving financial powers to regional and local governments to achieve good governance.
- Impacting spending on Developmental expenditure by States: Mainly constituting social- economic services that have witnessed an increase over the years (RBI).
- Limited sources of Revenue: Power to levy taxes largely rests with the Union. Further, the proceeds from Cess and Surcharge are not shared with the states.
Provisions related to State Borrowing
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