THIRUVANANTHAPURAM: The Comptroller and Auditor General of India has flagged a widening fiscal deficit for Kerala. The state’s fiscal deficit went up to 3.86% of GSDP from 3.02% in the previous year, well above the national average of 3.23%, said the state finances report for 2024-25 tabled in the assembly on Tuesday.
The report also warned against growing off-budget borrowings. The multiple accounting irregularities identified include irregular parking of the Chief Minister’s Distress Relief Fund (CMDRF) in the government’s consolidated fund. This was done to artificially reduce deficit figures.
The report said the state’s revenue deficit worsened sharply. It rose from 1.60% in 2023-24 to 2.49% of GSDP in 2024-25. The national average was only 0.67%.
Tax collection failed to keep pace with the economic growth (9.97%) and the state’s own tax revenue (SOTR) buoyancy was only 0.31, significantly less than one. The SOTR buoyancy reflects the growth of taxes relative to the economy. For Kerala, every 10% the economy expanded, taxes grew by only around 3%.
Growth in SGST and sales tax, state’s largest tax avenues, remained sluggish at 5.73% and 0.01% respectively. Committed expenditure consumed nearly 80% of revenue receipts and accounted for 64.40% of revenue expenditure. It included salaries amounting to `41,550 crore, interest payments of `29,138 crore and pensions amounting to `27,875 crore.
The state’s total outstanding liabilities stood at `4,45,901 crore, which was 35.71% of GSDP. The national average was 28.02%. Off-budget borrowings through KIIFB and KSSPL, to the tune of `39,230 crore, were not disclosed in the budget. When included, the total liabilities will rise to 38.86% of GSDP.
The report said `262.06 crore lying in five treasury accounts of the CMDRF was transferred to the consolidated fund during 2024-25. This accounting understated the state’s revenue and fiscal deficits by `262 crore. The state government told CAG that it was a routine practice in the year-end to artificially reduce public account size. The funds will be re-credited in the following week.
However, the CAG rejected the justification, saying routing public donations through the consolidated fund contravened accounting norms and was highly irregular.
Revenue deficit worsened
Revenue deficit rose from 1.60% in 2023-24 to 2.49% of GSDP in 2024-25
State’s total outstanding liabilities stood at D4,45,901 crore, which was 35.71% of GSDP
Off-budget borrowings via KIIFB and KSSPL — D39,230 crore — were not disclosed in budget