Union Budget neglects Kerala's specific demands, two positive takeaways

This year, the amount could be the same or higher than the previous year’s allocation.
For representational purposes
For representational purposes

THIRUVANANTHAPURAM: The two positive takeaways for Kerala in the Union Budget are the 50-year interest-free loan and the hike in import duty on compounded rubber. Dampeners include the cut in allocation for employment guarantee schemes and food subsidies besides the utter disregard for certain state-specific demands.

The Budget says the “Special Assistance to State for Capital Investment”, launched in 2022-23, will continue in the new fiscal. The scheme is to provide 50-year-old interest-free loans to state governments for capital investment projects.

This loan is over and above the normal borrowing ceiling allowed to the states. The quantum of the loan is decided in proportion to a state’s share of central taxes and duties as per the award of the 15th Finance Commission. In 2022-23, about Rs 2,500 crore was allotted to Kerala under this scheme, and the projects are in different phases of sanction. This year, the amount could be the same or higher than the previous year’s allocation.

The loan will be of immense help to the state government, which is facing a severe financial crunch due to the cuts in the devolution of tax share, revenue deficit grants, and the end of the GST compensation scheme.

As per the Budget announcement, the basic customs duty on compounded rubber will be increased to 25% from the existing 10%. Rubber constitutes over 80% of Kerala’s plantation crops and is a major contributor to the agricultural GDP. In 2020-21, Kerala produced 4,92,500 tonnes of rubber from 5,50,650 hectares. The Rubber Board said the decision would help domestic farmers get higher prices.

Economist B A Prakash welcomed the duty hike. “Several farmers have stopped rubber tapping owing to low prices. Now, the situation would change. It will result in a positive impact on the economy,” Prakash said. He said the Budget ignored the Covid-induced slowdown, which seriously impacted the Kerala economy.

“An estimated three lakh Keralite emigrants returned jobless due to the pandemic. The Budget did not address this problem despite it being a national phenomenon. Also, scant regard was given to people in the informal and small-scale industries who lost their jobs due to the pandemic,” he said.

TNIE had earlier reported that Kerala and Uttar Pradesh were two states where the economy did not recover from the Covid effect. Both states showed a negative growth rate in a comparison of the Net State Domestic Product (NSDP) of 21 states/UTs between 2022-23 and 2019-20.

Development economist Dr K P Kannan opined that the state should stop giving priority to budget-based stand-alone projects like AIIMS and take up broader causes like enhancing the devolution and continuation of GST compensation. Kerala should take the lead for collective pressurisation on the Union Government to get more funds. He also added that Silverline has lost its significance in the backdrop of the Railways’ decision to launch faster trains. “The cut in MGNREGS is a serious issue and exposes the centre’s lack of interest in the scheme launched by the UPA government,” he added.

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