THIRUVANANTHAPURAM : Indicating that the financial health of the state is precarious, RBI’s annual report on state finances for FY23 points out that Kerala’s debt-GSDP ratio stands at 39.1%, up from 28.9% in FY16. According to critics, the debt-GSDP ratio is a pointer to the financial health and default risk of the states, and ballooning liabilities is likely to put the debt servicing ability of Kerala under further stress with growth in revenue seen as sluggish due to various factors.
According to RBI report,Kerala’s total outstanding liabilities are projected at Rs 390859.5 crore in the 2022-23 budget as compared to Rs 162271.5 crore in FY16. Outstanding liabilities increased significantly in FY21, which was basically a lockdown period, to Rs 310856.2 crore from Rs 267585.4 crore in the previous fiscal and the debt-GSDP ratio rose from 32.5% to 38.9% respectively.
Kerala had spent more on welfare packages like supplying free food kits to every household during the lockdown period. The state has the ninth highest debt-GSDP ratio in the country in the current fiscal with Mizoram topping the list in the key indicator with a ratio of 53.1%Punjab (47.6%), Himachal Pradesh, (41.9%) and Rajasthan (40.2%) are some of the states that are ahead in the list.
Economist Dr. Jose Sebastian says Kerala’s position is more precarious than most other states with higher ratios.
“Risks of climate change and fast aging population pose a severe threat to Kerala’s economic growth in future. We have a higher vulnerability to natural calamities that would have a direct bearing on different sectors contributing to the GSDP, especially agriculture. Also, GSDP growth will go down with the rise in the elderly- dependency ratio,” he said.
The RBI report showed that the lowest debt-GSDP ratio in the past two decades was in FY12 at 26 % and it hovered between 28 % until 2014- 15. C.P. John, who was a member of the State Planning Board during the period, attributed it to the focus on tax collection, general ease of doing feeling in different sectors, and the resultant higher growth rate in GSDP.
According to him, most other states having higher debt-GSDP ratios, cannot be compared with Kerala. “They have smaller economies that do not have robust industrial or service sectors due to their geographical disadvantages,” he said.
However, debunking the allegations that the state is in a debt trap, Chief Minister Pinarayi Vijayan recently said that Kerala’s growth indicators are better than the national average. He said the debt burden of the Centre has grown from 47% of GDP in FY16 to 59% of GDP in FY21.
RBI REPORT HIGHLIGHTS KERALA’S LIABILITIES
According to RBI report,Kerala’s total outstanding liabilities are projected at Rs 390859.5 crore in the 2022-23 budget as compared to Rs 162271.5 crore in FY16. Outstanding liabilities increased significantly in FY21, which was basically a lockdown period, to Rs 310856.2 crore from Rs 267585.4 crore in the previous fiscal and the debt-GSDP ratio rose from 32.5% to 38.9% respectively.
Kerala had spent more on welfare packages like supplying free food kits to every household during the lockdown period. According to critics, the debt-GSDP ratio is a pointer to the financial health and default risk of the states.