Time for out-of-the-box ideas, not fiscal correction, says Kerala FM
THIRUVANANTHAPURAM: The Kerala government will not cut down on public spending at a time when the state is facing the worst crisis in a century, Kerala finance minister K N Balagopal has said.
“This is not the right time to think of fiscal corrections, and there is no question of us cutting down on spending. Rather, this is the time to think out-of-thebox, because as a democratic government we’ve to ensure the livelihoods are protected, which demands that we continued to spent so that economic activity doesn’t get stalled further and shrink an already-ravaged economy,” Balagopal said.
The state has been facing one of the worst fiscal crises for the past many years, which is reflected in its stagnating revenues, galloping expenditure and the resultant massive spike in public debt, which is over 36% of the state GDP now.
He also warned that “we’re in a time that’s worse than the Great Depression, and my fear is that we may face more difficulties going forward”.
Between FY15 and FY19, Kerala’s revenue plunged from 61% to 55%, according to the CAG report release in January.
According to the minister, the revenue decline accelerated after the roll out of GST as the state’s overall tax collection dropped by a third since then. Non-tax revenue halved to ₹6,000 crore and tax component of the state budget is down from ₹95,000 crore to ₹87,000-88,000 crore now.
As a result, public debt crossed 36% of GSDP in FY21 but nothing can be done now to correct it as the times are so bad, the minister said.
The state’s total debt burden increased to 70.21% in the five years to FY19—from ₹1,41,947 crore in FY15 to ₹2,41,615 crore in FY19, the CAG report showed. As a result, per capita debt has also jumped from ₹42,499 in FY15 to ₹66,561 in FY19.
“When you are discussing fiscal corrections in the present scenario, you have to accept that the government has to ensure that social welfare measures are run properly which means paying for public good and services; ensure economic growth, and protecting the livelihoods among others, all at a time when your revenue is shrinking. So, the only way out is to think out-of-box,” the minister said, adding that only a loose fiscal regime can help.
While admitting that there has been a constant stagnation in government revenues, Balagopal claimed that the situation is “not the state’s own making as we have since 2018 been ravaged by one natural calamity after another and now the pandemic too”.
Calling for some radical changes to the GST, the minister said since its roll out in July 2017, the state has lost a third of its revenue and it is time to undo “some of the damages to state’s finances”.