Thiruvananthapuram: The Union Budget 2022 was a complete letdown for the state compared to what Kerala demanded. None of the major demands of the state was addressed by the Union Finance Minister Nirmala Sitaraman in her fourth budget. The financial constraints of the state will get worse in the upcoming days, the government fears. It will have to opt for off-budget borrowings and other unconventional methods to meet needs.
Several states, including Kerala, had requested the union to extend the GST compensation to another five years. Without the compensation, the state will lose at least Rs 12,000 crores, state finance minister KN Balagopal had said. Since the budget did not address this, the only hope remaining is the intervention of the GST Council. The matter is under consideration of the Council.
Another demand was to unconditionally increase the borrowing limit of states to five per cent of the Gross State Domestic Product (GSDP) from the current limit of three per cent. Following the pandemic, the limit was increased to five per cent temporarily. However, it came along with four conditions, including changes in ease of doing business measures and implementation of nationalised ration cards. Only four per cent was permitted in this financial year. Though this has been retained, Kerala will have to implement much opposed reformations like privatisation of electricity distribution to avail half per cent of this. Since the state will not agree to the conditions of the union, it will lose another Rs 4,000 crore.
When the fiscal deficit of the union government is 6.9 per cent this year and 6.4 per cent in the next financial year, it is unfair to control the deficit of the state governments, Balagopal said.
Even though the Finance Commission has recommended providing Rs 1 lakh crore interest-free to the states, Kerala would only get Rs 3,000 crore, that too for a long period, Balagopal added.
The tax share to the state has increased to Rs 15,720 from Rs 14,332. However, this is only a natural increase, the FM said.
The state government analyse that besides these impediments, the cuts in the subsidies and share of MGNREGA will add fuel to the fire. Subsidy for urea fertilizer has been reduced to Rs 63,222 crore from Rs 90,549 crore. The earmarked amount for crop insurance also has been reduced. There is a decrease of Rs 4,000 crore in LPG subsidy as well. After renaming the noon meal programme in schools after the prime minister, the government claimed it would spend Rs 1.31 lakh crore in five years. However, the allocation for the next year is just Rs 10,243 crore.