Kerala Finance Minister K N Balagopal on Thursday said the Centre`s imposition of cuts in the borrowing limit of the states would adversely impact the southern state`s economy, which is yet to completely recover from the challenges due to the Covid-19 pandemic and back-to-back natural disasters.

The BJP-led union government adopted a "wrong policy" to reduce the state`s borrowing capacity after including the loans taken by the special purpose vehicles like Kerala Infrastructure Investment Fund Board and Kerala Social Security Pension Limited within the state government`s overall borrowing limit, he told the state Assembly.