Experts call budget inflationary; Congress plans agitation in Kerala

Fuel, liquor to cost more; tax on vehicles increased.Balagopal targets additional revenue to fund programmes.
Kerala Finance Minister K N  Balagopal having a chat with Chief Minister Pinarayi Vijayan at the Assembly before his budget presentation. (Photo | Deepu BP, EPS)
Kerala Finance Minister K N Balagopal having a chat with Chief Minister Pinarayi Vijayan at the Assembly before his budget presentation. (Photo | Deepu BP, EPS)

With his options limited, Finance Minister K N Balagopal on Friday chose to take some hard and unpopular measures to mobilise resources to manage expenses and fund government programmes. In the state budget for 2023-24, he proposed to hike fuel prices by Rs 2/litre, make liquor and personal vehicles costlier, increase the fair value of land by 20% and revise property tax and other fees with an aim to garner an additional Rs 2,900 crore in revenue.

While experts called the budget “inflationary”, the opposition Congress announced protests to oppose the increased burden on the common man.

The budget also spelt out the government’s vision for ‘Nava Keralam’ by outlining steps to harness renewable energy sources, including setting up of ‘green hydrogen’ hubs in Kochi and Thiruvananthapuram, and a new ‘energy park’ to tap the possibilities of power generation from sunlight and wind.

The budget also focussed on making Kerala a destination for ‘work near home’ and improving and establishing new IT and science parks even while placating the traditional fishing and the agricultural sectors. The vision included Kerala’s tourism 2.0 plan by developing tourism corridors, and no-frills airstrips in Idukki, Wayanad and Kasaragod.

The robust growth of 12.01% in the state GSDP in 2021-22 is reflected in its revenues, the finance minister said, adding that this will continue in the current financial year too.

As per the budget, the state’s own revenue grew by 25.19% to Rs 68,803.03 crore in 2021-22, and this is expected to increase to Rs 85,000 crore in 2022-23, a rise of nearly 24%. “This is a great achievement,” Balagopal said, presenting the budget. While the government aims to collect Rs 600 crore through a revision in royalty in the mining sector, the budget also proposed a revision of fees and the imposition of new taxes in the property sector. The budget proposed an additional tax for newly constructed houses that are not put to any use.

The finance minister, in his speech that lasted two and a half hours, blamed the central government for the state’s financial woes, saying there was a serious threat to “fiscal federalism” and that the centralisation of power and disregard for states, especially Kerala, has “increased unprecedentedly.”

“Unprecedented huge depletion of resources on the one hand and the additional burden is taken up on the other. These have to be considered together in comprehensively assessing the financial constraints,” Balagopal said.

Experts, however, begged to differ. “The entire additional revenues garnered through the fuel cess and other taxes are going to feed white elephants such as KSRTC. While this government has spent over Rs 24,000 crore through wage revision of government employees and pensioners, there has been no hike for welfare pension beneficiaries in the last three years,” pointed out V K Vijayakumar, chief investment strategist, Geojit Financial Services, a stockbroking outfit.

“This budget was a lost opportunity,” said Jose Sebastian, economist and former faculty of Gulati Institute of Finance and  Taxation.

Left with no option, govt imposes more taxes

“The minister did not touch the middle and the rich class in terms of additional taxes while the poor and the lower middle class were left high and dry,” said Jose Sebastian.  Both Sebastian and Vijayakumar said the huge salary outgo to the government employees will continue to burn a big hole in the state treasury.

Worryingly, the salaries, pension and interest outgo are expected to increase to 69.81% of the government’s revenue, an increase from 69.65% in 2022-23. The fiscal deficit to the GSDP ratio, meanwhile, fell from 3.61% in 2022-23 (revised estimate) to 3.5% in 2023-24 (budget estimate).

“The state government had no other alternative but to impose more taxes,” reckoned M A Oommen, honorary fellow of the Thiruvananthapuram-based Centre for Development Studies (CDS).

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