Kerala needs to raise revenues, control spending: expert

IIMK professor says State has to bring down public debt, interest outflows

Professor of Economics at the Indian Institute of Management Kozhikode (IIMK) Rudra Sensarma has said that the upcoming Budget of Kerala has to focus on boosting economic growth and plugging revenue leakages, particularly, its own tax revenues and non-tax revenues such as stamp duties and land revenue.

“Kerala’s own revenue collection at 46% is the second lowest among southern States after Andhra Pradesh. The State’s interest payment as a share of revenue receipts at 22% is the highest in south India and much higher than the national average at 14%. Yet, the State is the highest spender at 41% when it comes to non-developmental expenditure of the total disbursement,“ Prof. Sensarma told The Hindu on Wednesday.

He said the employment situation in the State had improved over the last few years. “Barring the lockdown periods, the unemployment rate is lower than before. But to improve investment and production from here on, the government has to realise that the public sector has reached its capacity,” he said.

To attract higher private investments, Prof. Sensarma said that some of the loss-making public-sector units could be handed over to private capital so as to revive their fortunes. “The budget must roll out the red carpet for private investments in a host of sectors where the State is fundamentally strong in tourism, health and education sectors,“ he said.

On big ticket projects such as the Silverline semi-high-speed rail, he said that expanding all types of physical infrastructure would help agriculture, tourism, manufacturing and exports. But the financing model and environmental concerns must be addressed while planning and executing such projects, Prof. Sensarma said.

He said that the Russian invasion of Ukraine would impact the State in two ways – on the Indian economy and on the Gulf economies. “Crude oil price has crossed $130 a barrel, the highest in 13 years. The soaring international oil prices and exit of foreign portfolio investments have already sent the rupee into a tailspin,“ he said.

On the other hand, he said the oil producing Gulf countries were enjoying windfall gains as the U.S. and the U.K. have banned oil imports from Russia. “Therefore, the Gulf nations will continue to grow and so the remittances to Kerala should remain unaffected,“ he said.