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FM Balagopal may rein in splurge on govt staff in Budget

“The budget discussions are just going on and we have not decided on the date of the budget.

Published: 26th January 2022 06:42 AM  |   Last Updated: 26th January 2022 10:06 AM   |  A+A-

Kerala Finance Minister KN Balagopal

Kerala Finance Minister KN Balagopal

Express News Service

KOCHI: With coffers nearly empty, Finance Minister KN Balagopal is expected to make some tough calls including withholding some of the benefits to the government employees in the upcoming budget, expected around the second week of February.

“The budget discussions are just going on and we have not decided on the date of the budget. But it will be around the second week of February,” Balagopal told TNIE over phone. The final date of the budget session will be decided after Chief Minister Pinarayi Vijayan, who is on a US visit for a medical checkup, returns on January 29.

The finance minister admitted that the financial situation in the state is not rosy following the economic downturn due to Covid and the resultant fall in business activities. The data validates the minister’s concern. The Gross State Domestic Product (GSDP) of Kerala plunged 11.51% in 2020-21 from 2019-20. And the GSDP in 2019-20 was anaemic at 2.22% from 2018-19 when the state economy grew at 7.37%. 

According to D Narayana, former director of Gulati Institute of Finance and Taxation, at the close of seven months of the financial year (April-October 2021), Kerala borrowed Rs 10.000 crore more than what was budgeted for the whole year. “Our revenue and fiscal deficits are already Rs 32,000 crore and more than Rs 40,000 crore, respectively. And 80% of our borrowings have gone to meet the revenue deficit,” he said. 

Fin min: We’re constrained by ceiling on the borrowing

The budget of 2021-22 estimated the revenue deficit at Rs 16,910 crore -- around Rs 1,500 crore higher than the 2020-21 budget estimate -- and the fiscal deficit at Rs 30,698 crore -- around Rs 1,500 crore higher than the 2020-21 budget estimate. Meanwhile, sources said the FM is determined to cut down on spending and he hinted at it during an interaction with the government employees recently.

“He was very blunt by telling them straight on their faces that the government will have to shut down if it continues to profligate on its employees,” said a source. Narayana said both salary and pension spending together crossed 70% of what has been budgeted for the whole year and it is likely that the two together would easily exceed Rs 84,000 crore by the end of the financial year.

Balagopal is hoping that the Union budget on February 1 will announce some concessions for the states to come out of the financial crisis due to the pandemic. The FM added that the elections to the five states will encourage the Central government to loosen its purse strings. The FM also expects the Centre to accede to its demand for a further increase in borrowing limits.

Last year, the Central government hiked Kerala’s borrowing limit from 3% to 5% of the GSDP. The enhanced borrowing limit had allowed Kerala to borrow over Rs 18,000-odd crore. “We are constrained by the ceiling on the borrowing,” said Balagopal, when queried about further borrowings including from the World Bank and ADB assistance.

“Whatever we borrow has to come within the ceiling. There’s hardly any room left now (for further borrowing),” he admitted. Narayana, however, said Kerala should not expect any big assistance from the Union budget. “Whatever financial assistance that the Central government announces would be reserved only for the poll-bound states,” he reckoned.

KERALA GSDP

2020-21: -11.51%
2019-20: +2.22%
2018-19: +7.37%

At end of seven months, Kerala borrowed Rs 10,000 cr more than what has been budgeted for the fiscal year 

Revenue and fiscal deficits are Rs 32,000 crore & Rs 40,000 crore



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