Kerala budget is a missed opportunity
Kerala Finance Minister K N Balagopal’s third budget is not populist. But then he had no choice. The proposed tax hike on fuel, liquor, and the land was inevitable as he had to augment tax and non-tax revenue to the maximum extent, given that the fiscal constraints in 2023–2024 will be more than that of the current year. But has he done enough considering the state’s precarious financial position? In the coming fiscal, the state is staring at a shortfall of Rs 8,400 crore in Revenue Deficit Grant compared to 2022–23, a loss of around Rs 5,700 crore due to the cessation of GST compensation, and a resource loss of around Rs 5,000 crore due to the restriction on the borrowing limit. Additional revenue mobilisation envisaged in the budget is estimated to bring around Rs 3,000 crore, which would be woefully inadequate, and the government will have to increase its borrowing for capital expenditure. The total debt stock as a percentage of GSDP is 36.05%.
Also, while making sizeable grants to various sectors, the finance minister has failed to make any concrete proposal to reduce expenditure. Revenue expenditure on salary, pensions and interest payments constitutes 69.81% of the total revenue. The fiscal profligacy of the state on administrative expenses needs to be curbed, and at least jobs that have become redundant due to technology should be scrapped.
Despite the constraints, Balagopal has deftly managed (at least on paper) to lower the fiscal deficit to 3.51% of GSDP as against 3.61% in the revised estimate of FY23. The budget document spells out the government’s thoughts on borrowing, saying that Kerala has the economic position to avail of more loans
and is not in a debt trap.
For the finance minister of a revenue-starved state like Kerala, the budget is an exercise of achieving a delicate balance between scarce resources and unending needs. However, taking debt to finance the expenditure is akin to passing the burden on to the future generation. Debt is good as long as it is used for capital expenditure to grow the economy and increase revenue. Balagopal has displayed that he understands the situation and what his job is under the circumstances by boldly opting for steep tax hikes. But, this budget should still be treated as a missed opportunity, as he has sorely failed to propose much-needed austerity measures and be innovative in additional revenue mobilisation.