Like Andhra Pradesh, Kerala too has urged the Centre for special permit to stretch the State?s market-borrowing limit by Rs 2,000 crore during 2009-2010. Amidst resource crunch, Kerala Government anticipates that this would be necessary for pushing capital expenditure spending component in its next budget.

?Jacking up capital expenditure is vital to undertake more public works in rural connectivity, building fishing harbour, minor irrigation works etc,? State finance minister TM Thomas Isaac said, after submitting a memorandum to this effect to PMO and the Planning Commission.

To be allowed to dip Rs 2000 crore more from the market would mean a waiver equivalent to 1% of Kerala?s gross state domestic product (GSDP). In absolute terms, the Andhra Pradesh government had been allowed a similar provision earlier.

In the current fiscal, the Kerala government had been allowed a stretched ceiling of market borrowing equivalent to 0.5% of its GSDP. Thus besides the Rs 5,700-crore worth market borrowing the State is generally entitled, in 2008-2009, Kerala was allowed an extra Rs 800 crore for beefing up its capital spending. This was released last week, sources told FE.

Kerala, Andhra Pradesh and Maharashtra are among the States which regularly resort to market borrowing, especially through the auction route. During FY-04, Kerala raised the highest share of its market borrowings through auction (23%) followed by Andhra Pradesh and Maharashtra (15% and 11 %, respectively).

Unlike other States, Kerala had been suffering deceleration in its capital expenditure growth in this decade, when the State decided to go on a studied push on its developmental spending side. With this view, from Rs 950 crore in the previous fiscal, the capital expenditure was raised to Rs 1,506 crore in 2008-2009. But even now, this is only 1% of the overall revenue spending. By targetting to push it to 2% of revenue expenditure, capital expenditure would be upped to over Rs 3,000 crore.

In the current year, infrastucture building is more on the focus to trigger counter-cyclical measures, at a time when the State is threatened by the global meltdown in its cash crop exports and NRI remittances.