SC on fiscal management: The Supreme Court addressed the issue of fiscal mismanagement by states, highlighting its potential impact on the nation's economy on Wednesday. The context was a hearing on a suit filed by the Kerala government against the Union of India, accusing it of encroaching on the state's financial autonomy by imposing borrowing constraints. The court urged both parties to engage in constructive dialogue to resolve the matter, emphasising the importance of cooperative federalism.

The bench of Justices Surya Kant and K V Viswanathan encouraged senior officials involved in decision-making to convene and find an amicable solution. Despite a previous meeting on February 15 yielding limited progress, the court stressed the need for ongoing discussions between the Centre and the state.

Senior advocate Kapil Sibal, representing Kerala, expressed the state's predicament and the necessity for a resolution, emphasising the importance of cooperative federalism. The court suggested that conditions for improved fiscal management could be imposed by the Government of India but insisted that withdrawing the suit should not be a prerequisite. It underscored the constitutional right under Article 131, empowering the court to handle disputes between the Centre and a state.

The issue revolves around Kerala challenging the Centre's authority to impose borrowing conditions, seeking additional borrowing without withdrawing its suit. The court acknowledged the notes submitted by both parties and stressed the significance of addressing fiscal mismanagement at the state level. The apex court refrained from setting a specific date for the next hearing, allowing the parties to mention it as needed. The ongoing dialogue between the Centre and the Kerala government was deemed crucial for maintaining a robust relationship between the Union and the state, the court concluded.