THIRUVANANTHAPURAM: The revision of government employees’ salary and pension in line with the recommendations of the 11th Pay Commission dealt a severe blow to the state’s finances, the CAG report for the year 2021-22 has said.
The state government’s spending on salary and pension increased by Rs 25,000 crore to Rs 72,678.77 crore, which was higher than the state’s own revenue of Rs 68,803.03 crore, the report, tabled in the Kerala assembly on Thursday, said.
“The expenditure on salaries and wages increased by Rs 17,012.62 crore, 59.14% growth, in 2021-22 when compared to 2020-21. It contributed to 31.32% of the total revenue expenditure. Salaries and wages, as a percentage of revenue receipts, increased from 29.47% in 2020-21 to 39.25% in 2021-22,” said the report. The expenditure on pension and retirement benefits increased by Rs 7,955.84 crore compared to the previous year.
“The drastic increase in salaries and wages, 59.14%, and pension, 42%, is due to the revision of salary and pension implemented from April 2021. The increase in financial burden on account of salaries and pension was Rs 24,968.46 crore,” it said. Since the expenditure on salary and pension was higher than the state’s own revenue, the government had to resort to borrowings to meet its committed liability, which had a consequent impact on the interest payment as well, it said. Over 82.29% of the total revenue receipts was spent on salary, pension and interest payments.
Debt burden
The report said the state did not achieve any targets fixed in its Medium-Term Fiscal Plan or the Kerala Fiscal Responsibility (KFR) Act in 2021-22. The fiscal deficit to GSDP ratio of the state was 5.10 against the targeted 4. It also flagged the increasing debt liability. The overall debt of the state, including off-budget borrowings by KIIFB and KSSPL and deferred liability through the Bill Discounting System for government contractors, was Rs 3,83,267.15 crore. The effective total liabilities, after excluding the GST compensation of Rs 14,505.31 crore received as back to back loan, was Rs 3,68,761.84 crore.
“If the government continues to borrow year after year, it would lead to the accumulation of debt and the government would have to pay more by way of interest. These Interest payments themselves contribute to the debt,” it said. The increase in debt reduces capital formation and growth but would also be a “burden on future generations”, according to the report.
Central transfers
The Central tax transfers stood at Rs 17,820.09 crore in 2021-22, an increase of 54.15% over the previous year. This was attributed to the increase in direct taxes and indirect taxes by Rs 3,155.69 crore, 43.90% and Rs 3,104. crore, 71%, respectively. The Grant-in-Aid from the Union government contributed to 25.73% of the total revenue receipts.