High on populism, low on economic sense

Borrow more and spend even more. It’s a plan as good as any for Kerala Finance Minister Thomas Isaac, and he knows his job. His Budget for 2021-22, filled with grand announcements and ambitious proposals while singularly lacking in plans to explore avenues for additional revenue generation, is how you make a political statement in the guise of laying the financial roadmap.

If the intention was to create positive vibes around the state of the economy, camouflage the pandemic-induced gloom and spread the feel-good factor to aid his party in the coming Assembly polls, he has done his job. Not if the Budget is meant to be treated as an exercise to formulate sound financial plans for economic well-being and all-round development.

While the evidently populist measures—the increase in welfare pension and support price for some crops, the promise to create 20 lakh jobs and implement pay revision for government employees, and laptops at subsidised rates for students—will help contribute to the ruling LDF’s pro-people image, proposals like the Knowledge Society programme as part of the digital push and three industrial corridors at Rs 50,000 crore have lent a futuristic tone to what’s essentially a political game plan.

More was expected from Dr Thomas Isaac the economist in terms of proposals to stabilise the ailing economy and set it on the path of recovery and growth. Instead, what we saw was the politician finance minister delivering promises keeping the election in mind, with no real obligation to fulfil them given the political uncertainty. 

The borrow-and-spend philosophy has increased Kerala’s debt burden substantially. While the total outstanding debt has zoomed to 36.11% of the GSDP, the state is expected to spend `21,940 crore (15% of the revenue expenditure) on interest payments alone in the coming fiscal.

The fiscal deficit has risen to 4.25% of the GSDP. While salary and pension payments already account for 43% of the revenue expenditure, the bill is set to mount with the pay revision. The Budget makes a perfect job of masking financial blues. Full of good news, it’s a potent political document, delivered with intent. As a financial strategy, it’s lacking on many counts.