KERALA: The idea of increasing revenue collection efficiency has gone for a toss. By quoting absolute figures of tax collection, Finance Minister K N Balagopal gives the impression of an increase in efficiency. But he does not mention the corresponding increase in state income. The yardstick of revenue collection as a percentage of state income is never mentioned.
When one does that, the 2023-24 revised estimate shows a collection of Rs8 for every Rs100 of state income measured as Gross State Domestic Product. Balagopal’s expectation was 8.67% in last year’s budget estimate. Worryingly, he expects this ratio to go down to 7.87% in 2024-25. Kerala’s best record of collecting Rs 11.5 for every Rs 100 of state income has been given a quiet burial. The state has slowly, but steadily, ground down to a low-level equilibrium of efficiency at around 8%.
But its expenditure has not shown any such decline. The mantra here is ‘borrow, borrow more and then even more to pay the earlier borrowings.’ That has landed Kerala in a kind of trap whereby one-fifth or around 20% of the total revenue must be earmarked to pay interest. Add to this the other big commitment of pension payments, which has catapulted from a 10% figure to around 20% or more. These two items together constitute more than 40% of the total revenue, compared to 20% or so for most other states. In 2022-23, this figure stood at 38.6% for Kerala. In 2023-24, it is reported at 41.80%, and the finance minister expects a similar figure in 2024-25. So, for a revenue of Rs 100, he now has just Rs 58 to spend on the rest of the government business.
That the finance minister missed one more opportunity to raise the retirement age and announce a scheme to create more employment should be worrying to the educated youth of the state.
But this budget has flagged other important issues. The full acceptance of the neoliberal economic policy of the Union government is only one such. That the economy is doing well with an increased share of the annual flow of remittances is something he has chosen not to talk about because that could lead to inconvenient questions about revenue collection from an additional source of disposable income. While the announcement of welcoming foreign universities into Kerala is path-breaking, the thrust on service sector and the relative neglect of the producing sectors of the economy is worrying. The new pension system exclusively for Kerala government employees is another announcement that needs serious deliberation. One does not know whether this is an effort to open a new source of funding for the government.
The pervasive inefficiency of the governance system has been sought to be concealed through elaborate announcements on allocations and seemingly attractive phrases such as ‘sunrise’. What kind of a sun is going to rise in Kerala is something we will have to wait, watch, and see.
Former director, Centre for Development Studies