Kerala: Success Story of an Alternative Path
K N Balagopal
THE economic activities of the state government during the financial year 2022-23 can be considered commendable despite the negative attitude of the central government and the imposition of economic sanctions. In March alone, the Kerala government spent Rs 22,000 crore from the treasury on various governmental activities, and funds were made available for all developmental and welfare activities without hindrance. Due to the measures taken by the central government, the state experienced a revenue shortfall of approximately Rs 40,000 crore during this financial year. However, it was by overcoming this difficulty that the state was able to achieve such success on the economic front.
The plan expenditure of the local bodies has exceeded 100 per cent, and no reduction has been made in public expenditure. All expenditures, including payment of salaries, pensions, and loan repayments, were met on time. The funds for model residential schools, their hostels, and scholarships for ST students were fully released. Payment of production incentives was made for traditional sectors such as coir, handloom, and khadi. Kerala State Road Transport Corporation (KSRTC) received more funding than what was earmarked in the budget, and an excess amount was allocated to the ‘Punargeham’ (alternative housing) scheme for the fishermen community. Despite concerns raised by some media groups about the disruption of salary payments from January 2023, all such claims were unfounded and based on misinformation triggered by the policies of the central government. Many predicted a shutdown of the treasury and an economic collapse similar to what happened in Sri Lanka and Pakistan, but none of those predictions came true.
Despite the central government's hostile attitude towards Kerala, the state was able to achieve a remarkable feat through diligent efforts to increase both its tax and non-tax revenue, as well as by implementing prudent financial management. This year, the state's own tax revenue registered an increase of Rs 12,848 crore, and there was a 25 per cent increase in GST receipts compared to last year. The increase in own tax earnings during the past two years was over Rs 23,000 crore, and the cooperation of the people has been instrumental in this regard. Ongoing efforts to reorganise the state's GST department aim to make it more efficient.
Out of the total revenue income of Kerala in 2022-23, 62.20 per cent was the state's own income, while the average own income of the states at the all-India level was 54.74 per cent. Bihar's share of own income was 24.16 per cent, whereas the figures for Assam, Rajasthan, Odisha, and West Bengal were 29.16 per cent, 56.03 per cent, 57.45 per cent, and 43.43 per cent, respectively. Only industrially advanced states like Haryana and Maharashtra are ahead of Kerala in mobilising their own income. This highlights the deficit in the share of tax revenue allocated to Kerala by the central government and demonstrates the efficiency of the state's systems for collecting tax and non-tax revenues.
The public sector units of the state have also displayed good performance. Kerala State Financial Enterprises (KSFE) handled a 'chitty' business of Rs 875.41 crore, including Rs 54.16 crore mobilised under the 'chitty' scheme for NRIs. The chitty collection for 2022-23 amounted to Rs 36,500 crore, and deposits worth Rs 21,800 crore were also collected. The Kerala Financial Corporation (KFC) achieved its highest growth rate in a decade, with its balance sheet registering a growth of 36.82 per cent, increasing from Rs 4,75,071 crore in 2012 to Rs 6,50,000 crore this year.
During the first term of the present LDF government headed by Pinarayi Vijayan, projects worth Rs 50,000 crores were planned to be implemented through the Kerala Infrastructure Investment Fund Board (KIIFB). As of now, approval has been accorded to 1057 projects at a total cost of Rs 80,352 crores. Till 2021, a total of Rs 6000 crore had been released from KIIFB towards the implementation of projects, which has increased to Rs 23,095 crore now. A yearly allotment of Rs 100 crore has been earmarked for the functioning of the Kerala Development and Innovation Strategy Council (KDISC). The projects announced in the budget, such as the Centre for Excellence in Microbiome, Genomics, Neutraceuticals, and the Electric Vehicle Consortium, are being carried forward.
The public sector units operating in the industrial sector have also shown positive results, with more than 20 units earning a profit. Kerala Small Industries Development Corporation Ltd (SIDCO), Steel Industries Kerala Ltd (SILK), Travancore Cochin Chemicals Ltd (TCC), and Steel and Industrial Forgings Ltd (SIFL) registered good growth in profit and turnover. The Hindustan Newsprint Ltd, which the central government was about to privatise, was taken over by the state and renamed Kerala Newsprint Ltd. The unit started production of newsprint this year and the product is being distributed to major media houses of the country. The MEDISEP programme, offering medical insurance coverage up to Rs 3 lakhs to about 11 lakh government servants and pensioners, is being implemented successfully.
DETRIMENTAL ATTITUDE OF
CENTRAL GOVERNMENT
A state government functioning under the federal set-up of our country has many limitations. It is the constitutional duty of the central government to provide all support to a state in achieving growth and development. However, the central government is not only neglecting this responsibility but also adopting a negative attitude towards certain states.
The share of Kerala from the divisible pool of the central government, which was 3.875 per cent during the 10th Finance Commission, was reduced to 2.5 per cent during the 14th FinanceCommission and further lowered to 1.925 per cent by the 15th Finance Commission. As per the report of the 15th Finance Commission, the centre is taking 62.7 per cent of total income, leaving just 37.3 per cent to the states. At the same time, the states have to bear the burden of 62.4 per cent of expenditure. This clearly indicates the financial deficit faced by the states, including Kerala, due to the central government's unfavourable policies.
The GST compensation to Kerala has been stopped since June 2022, resulting in a shortfall of around Rs 9,000 crore in the state's receipts compared to the previous year. However, a favourable decision has not been taken on the demand of Kerala and several other states to extend the compensation period for five more years. On conversion to the GST system, the states had to forgo 52 per cent of their own tax income while the loss to the central government was just 28 per cent. Even though the tax rates are being decided by the GST Council, which includes representation from the states, it is ultimately under the control of the central government. The state government can collect its own taxes only on petroleum products and liquor. When the government of Kerala decided to levy a cess of Rs 2 each on petrol and diesel to create a seed fund for paying social security pensions, the opposition tried to mislead the public by organising agitations.
At a time when many economists fear that the international and national economies may slip into recession due to the continuing shocks of Covid-19 and the Ukraine crisis, Kerala has managed its finances successfully this fiscal year. The global economic growth for the financial year 2022-23 is projected to be just 2.9 per cent, according to the IMF's report. The disruption in the global supply chain has caused a significant dip in world trade. Our neighbouring countries, such as Sri Lanka and Pakistan, are in a big economic crisis, experiencing more than 40 per cent inflation.
However, the opposition in Kerala has adopted a negative and non-cooperative stance on all matters. During the budget session of the legislative assembly, they boycotted the entire discussion and disrupted the proceedings. The opposition is also pursuing an attitude of blocking all developmental activities in the state.
The move to financially strangle Kerala is indeed a part of a well-planned attempt to politically and administratively destroy the Left Democratic Front and Kerala, especially at a time when the Lok Sabha elections are around the corner. Denying Kerala its deserving financial share when it is made available to other states will adversely affect the entire population of the state. It is a serious issue that the progress that could have been made in various sectors has been slowed down or delayed due to the reduction of the eligible share by the central government.
Unfortunately, the United Democratic Front (UDF) and the Congress Party are trying to undermine the genuine interests of the state by creating difficulties for the people due to their animosity towards the LDF. Moreover, the UDF has failed to expose the anti-Kerala agenda of the BJP. However, the government of Kerala is fully confident of overcoming these hurdles and ensuring the welfare of the people.
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