Kerala Budget: Hard days ahead

Adarsh Balachandran

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KN Balagopal presents budget 2023-24

Presenting his Budget for the first year of new millennia in 2001-02, the then Kerala Finance Minister Shri K Sankaranarayanan lamented, "It is with deep humility that I've taken over my onerous responsibilities. It would not in the least, be an exaggeration to say that I have been handed down a treasury that is practically empty. The exchequer bequeathed to me is truly in a woeful state". After two decades of this honest acceptance of the state of Kerala's economy things don't look that robust for the economy of Kerala.

Union said, Kerala sensed
The Finance Minister must be complemented for his sense of foreseeing the outcomes of the Union Budget 2023-24. As he sat over authoring contents of the state Budget, he might have known what was there in the Union Budget. Covid uncertainty was over, Ukraine war was not causing geopolitical uncertainties, supply chains were being restructured, inflation was in control, it was certain that the Union government was going for the spending push. This was the perfect moment that K N Balagopal was looking for, it was time to let the gin out of the box, it was time to tax.

Nirmala Sitharaman | Photo: PTI

What the statistics said
Kerala was ranked 28th in the year 2019 in Ease of Doing Business Rankings by Department of Industry and Internal trade (DPIIT). Even though in the year 2020 there was an improvement in the rankings to 15, the investments in the state had significantly come down. Five year's ago nearly 19 percent of total NRI remittances of India was contributed by Kerala alone. This was drastically reduced to 10.2 percent in 2022. Maharashtra overtook Kerala to become the state with largest NRI remittances in India. The crisis in Gulf countries, Covid which created an exodus of immigrants back to Kerala, frequent floods and natural disasters, introduction of GST, uncontrolled spending by the state, all had added layer after layer to the financial crisis. Reserve Bank of India's annual report of state finances for Financial year 2023 points out Kerala's debt-GSDP ratio at 39.1% up from 28.9% in FY16. The total outstanding liabilities of Kerala state was projected to be Rs 390859.5 crores in 2022-23 compared to Rs 162271.5 crores in Financial year 2016. Much of this was contributed due to poor fiscal discipline pracised by the State.

Budget shocker
Kerala government Budget for 2023-24 was a shocker for ordinary Malayali. K N Balagopal has explored all ways and means to get some funds pushed to the state exchequer. Resource mobilization began with the reforms in the mines and minerals sector which included seven changes. This was expected to bring in a revenue of Rs 600 crores. The revision of property taxes was expected as it was long pending due. However, the revision is being planned at a time when the majority of the households are yet to recover from the pandemic crisis. The Finance Minister expects to rise at least 1000 crores through this revision. Revision in electric duties were expected. It is to be noted that the Kerala legislature unanimously passed a resolution against the electricity bill 2021 introduced in parliament which gave private sector access to distribution of electricity. In Kerala electricity generation, transmission and distribution are solely undertaken by Kerala State Electricity Board Limited. Having KSEBL within the public sector helped the state generate revenue out of this. The state government hiked taxes paid on purchase of vehicles. The hike in road tax ranges from 1 percentage to 2 percentages. These changes are expected to generate additional revenue of upto 340 crores. The total revenue receipts are expected to be Rs 135418.67 crores whereas revenue expenditure for the state is estimated to be Rs 159360.91 crores. This will generate a revenue deficit of Rs 23942.24 crores, an increase of Rs 4026.71 crores from the Revised estimates of 2022-23.

Expenditure segment
Even though there are wide spread criticisms against the state government, we must complement the state government for the welfare measures it undertakes. K N Balagopal's budget has enough provisions for the welfare of the ordinary citizens of Kerala. An amount of Rs 859.50 crores have been earmarked for the welfare of scheduled tribe population in the state in addition to Rs 8.75 crores for incentives and assistance to ST students. Rs 2979.40 crores is earmarked for Scheduled caste sub plan. There is also an amount of Rs 429.61 crores for providing educational assistance to scheduled caste students. The FM deserves a huge round of applause for earmarking such a high provision in the Budget for the welfare of these communities. The allocation to the cultural and archeological department is far from adequate. Archeology and cultural departments must be given more funds to enable them to preserve the existing culture of Kerala. While there is an allocation of Rs 252.40 for the technical education sector, high brain drain diminishes the prospective optimisation of this sector. The special action plan formulated for 2023-24 to help universities and higher educational institutions with an amount of Rs 816.79 crores will not achieve desired results unless the disastrous seeds of corruption, nepotism and favoritism are weeded out from these institutions. The state plan outlay on education for Rs 1773.09 crores is not adequate to meet the emerging challenges of the day. Students need to be equipped with the latest skills and technologically embedded learning mechanisms. Our schools have to be modernized and the education sector must be revamped. State must bring in urgent measures to explore ways to privatize the transportation sector while protecting the rights of the workmen. Keeping the ailing industries under state control can have drastic economic consequences.

Extreme situations demand extreme reactions. But the FM should have moved with a little more caution. A detailed economic study of the state of finances of Kerala must be undertaken on an emergency basis. Steps must be taken to ensure the welfare of expatriate Keralite's. They must be encouraged to send more to Kerala. Industry status in the Tourism sector is a long pending demand. This must urgently be taken up and local and village level tourism must be promoted. Identification of all the ailing public sector units must be done without much delay and strategic disinvestment process and asset monetization can't be put on hold any longer. In order to weed out corruption at all levels, vigilance mechanisms must be strengthened. All transactions of the Motor vehicle department, challans etc must be digitized. The Finance Minister must stop blaming the central government for the crisis. Since we are a consumerist economy in the end, GST revenues will flow to the state ultimately. Instead of blaming the game, we must do a SWOT( strengths, weaknesses, opportunities and threats) analysis of our economy. State must become more industry friendly in order to make it competent in the coming years. Steps must be taken to ensure fiscal prudence at all levels. Unlike the central government which has assets to manage rising debt, the state has no access to such resources. Hence all efforts must be made at all levels to contain the debt crisis.

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