Number juggling won’t be enough

If the Economic Review released Thursday underscored the Kerala growth story, the state Budget presented on Friday matched the hype with some ambitious proposals. Finance Minister Thomas Isaac’s temptation to take the populist route, with sops for various sectors and an extra push for the LDF’s social welfare agenda, and make a few political points is understandable, as local body polls are due in a few months and there’s just a year left for Assembly polls. But without any clarity on mobilisation of resources to account for the increased spending, the exercise looked a lot like financial jugglery than a concrete plan to ensure development and economic well-being.

While drinking water projects, high spending on healthcare and education, incentives to farmers and meals at Rs 25 are some notable proposals, the Budget also made a note of the mounting debt burden. With the Budget estimating the public debt to touch Rs 2,02,713 crore in the coming fiscal, the total outstanding debt is expected to mount to Rs 2,92,086 crore—nearly 30% of the GSDP. Ironically, while the government is planning to borrow another Rs 24,491 crore, including market loans, it will require Rs 19,850 crore to pay interests alone. Another issue the Budget has failed to tackle is the swelling salary bill. As of now, salaries and pensions account for 42% of the revenue expenditure, and with the government starting the process of salary revision, the burden is set to increase soon.

Further, while calculating the expected revenue in the coming fiscal, Isaac seems to have ignored the prevailing economic climate. Against an estimated state tax mop-up of Rs 65,784 crore, the state could collect only Rs 55,671 crore in 2019-20 (revised estimates). But he has ambitiously pegged the 2020-21 collection at Rs 67,420 crore. Another sore point is his attempt to pay mere lip service to austerity plans, which could render the Budget high on promises and low on delivery. While effective projects in core sectors are a necessity, fiscal discipline requires equal attention. Kerala needs to tackle the twin problem of debt burden and salary bill—a point that has been missed by Isaac.