Kerala had landed in a financial crisis much before the outbreak of Covid. In the last 15 months, the crisis deepened as the pandemic gripped the state. The financial crisis now faced by the state is the worst since its formation. The latest CAG analysis reveals that Kerala’s revenue and fiscal deficit increased by 60% and its annual borrowing soared by 60% in the last fiscal. The new finance minister, KN Balagopal, ventured out to present his maiden budget in this background.
Sadly, the budget doesn’t give us any idea how the government plans to come out of this crisis. The practice followed by Balagopal’s predecessor was to borrow large sums and use that for routine expenditure. If we analyse the Rs 38,000 crore the state borrowed last year, around 70% of that is seen to be spent for revenue expenditure. There is no hint this practice will stop soon and that means our debt burden will worsen in the coming months.
In the last report of CAG, there were some serious observations against KIIFB. The borrowings by KIIFB needed to be within the state’s statutory borrowing limit. Though the state has contented these curbs, chances are high that unbridled borrowing by the outside agency will have to be stopped. The budget is silent on this though the right step would have been to start addressing this issue and find solutions. The Covid package of Rs 20,000 crore sounded good in the speech. Sadly, there is no mention at all from where the additional resources will be mobilised.
Later, Balagopal clarified that this package is drawn from allocations already made in the budget. If so, how that can be called a special package? The worst-hit sectors during this pandemic are trade and tourism. Traders and tourism promoters were expecting some bailout packages. There is nothing for them. Transport is another worst-hit sector. There are seven lakh autorickshaw drivers in the state and all of them badly need support. It is true the budget allotted money to continue supply of free grocery kits. There should have been some schemes to transfer money directly to those who have been affected badly.
Reverse migration, especially from the Middle East, has developed into a major social crisis. The estimate is that 14 lakh people returned to Kerala following Covid crisis and 60% of them returned after losing their jobs. There is no concrete plan in the budget to help them.
The only silver lining I see is the minister’s admission that our economy is facing a serious crisis owing to Covid. He speaks about the need to revive the economy and has plans to pump money to revive it. That is a positive sign. The one factor that differentiates Balagopal from Thomas Isaac is that the former is more pragmatic and believes in a disciplined fiscal approach. Rather than following dream projects, let him handle the finances with the time-tested, conventional approach.