No solution in sight for fiscal crisis

However, Budget has some sound development projects

Kerala has been experiencing an acute fiscal crisis somewhat similar to the worst crisis experienced in State’s history during 1999-2000. The crisis has four dimensions: decline in own resource mobilisation, excessive increase in salary, pension and other items of non-plan revenue expenditure, steep fall in plan expenditure, and increased burden on interest and debt repayments. During the first 10 months of the current fiscal year, the ratio of gross fiscal deficit to total expenditure went up to 34%, the highest rate of increase since 1999-2000. But the Budget has not addressed the above issues or proposed measures to improve the fiscal situation.

The root cause of the current crisis is the implementation of pay revision of February 2021 with retrospective effect from July 1, 2014. The additional financial commitment for paying the revision with arrears is estimated at ₹12,000 crore. A good part of the amount is yet to be paid. The government has no idea about solving this issue and the Budget has not proposed anything to address it. It is proposed to finance the new schemes announced in the Budget through the Kerala Infrastructure Investment Fund Board (KIIFB). But the KIIFB does not have the funds to meet the expenditure for the projects as it has committed to huge amounts for the existing schemes.

The COVID-19-induced economic crisis has rendered lakhs of self-employed and casual labourers in the State jobless. It may be noted that of the total workers in the State, 37.8% are self-employed and 29.3% are casual labourers. Lakhs of non-resident Keralites were forced to return to the State from Gulf. It is estimated that 14.71 lakh Keralite emigrants returned due to COVID-19 crisis, mostly from GCC countries. But the Budget has no proposal to provide relief to these categories.

The Budget has a number of sound proposals for the development of sectors such as IT, roads and start-ups. It is proposed to start a new IT park at Kannur, four IT corridors, and other IT infrastructure schemes.

Expansion of knowledge economy mission for skill development and measures to increase the quality of higher education are other notable projects. A number of new roads, bridges and national highway projects are also proposed. In the context of fall in rubber price, the proposal for a ₹500-crore subsidy will help the farmers. The proposals to allot ₹250 crore for medical colleges in the State, ₹100 crore for medical innovation lab, ₹50 crore for Institute of Advanced Virology, and ₹88 crore for Regional Cancer Centre are sound projects.

In sum, the Budget totally failed to address the acute fiscal crisis. On the other hand, it has sound projects and schemes for development of some sectors.

(The author is former Chairman of State Finance Commission, Kerala)