Forget Tax, Focus On Vax

Thiruvananthapuram: Finance minister K N Balagopal's maiden budget, presented in the assembly on Friday, had limited its focus to Covid-19 emergencies but it neither made any new tax proposal nor dared to explore options to cut the state's soaring expenditure cost. The revised budget set aside Rs 1,000 crore for vaccine procurement and another Rs 775 crore for Covid care and preventive measures.
The new finance minister, however, shunned the predilection of his predecessors for frills and gimmicks in presenting the budget. Poems and quotable quotes found no place in his speech. Instead, he delivered a matter of fact speech that lasted only an hour and one minute. The differences, however, ended there. After all, it was a revised budget with very little choices.
Throughout his speech, Balagopal tried to present the dire situation of the state economy, which has contracted by nearly 4% in the 2020-21 fiscal. Echoing his predecessor T M Thomas Isaac’s oft repeated statement, Balagopal put forth the second Pinarayi Vijayan government’s fiscal policy: “Borrowing is not a sin and mounting debt can't intimidate the Leftist government”.
“We face a severe financial crunch. But that won’t scare us away from loosening our purse to bring support to the needy. The government would continue with the free grocery kit distribution. Enough would be done to ensure cash flow to the vulnerable sections badly hit by the pandemic. The health infrastructure facilities will be ramped up to face all sorts of health emergencies. Once the economy bounces back, we would think about tax hikes,” he said.
The minister later clarified further the reasons that prompted him not to go for tax increase. "Even if we increase the tax now, we will have to announce another amnesty scheme soon,’’ he said, hinting that the poor health of the economy was the only reason that prompted him not to explore tax hike options.
However, the realistic views of a contracting economy described by the minister in his budget speech and later during his interaction with media, did not reflect in the budget documents. He shared Isaac’s anticipation that the state economy could dramatically bounce back to achieve a 6.6% growth in GSDP growth rate from the -3.82 growth rate it registered in the 2020-2021 fiscal. It may be recalled that governor Arif Mohammed Khan, in his address to the House, had said the 6.6% GSDP growth projected by the government for 2021-22 seemed unrealistic, given the second Covid wave and lockdowns.
If a highly optimist Isaac dreamt that the state's revenue receipts would jump to Rs 1,28,375.88 crore in 2021-22 from Rs 93,115 crore in 2020-21, and the state's own tax revenue would grow from Rs 45,272 crore to Rs 73,120 crore, the medium fiscal plan tabled by Balagopal projects a still higher growth for the period. According to documents, he expects the revenue receipts to increase by around Rs 2,600 crore in 2021-22, though the state's own tax revenue could go down by close to Rs 1,300 crore.
Ambiguity took the sheen away from the Rs 20,000 cr Covid package announced to revitalise the economy. After announcing Rs 8,900 crore for direct cash transfer to those under financial stress owing to loss of livelihood due to the pandemic, the minister had to explain outside the assembly that the cash transfer would only be in the form of existing welfare pensions, state’s contribution to MGNREGA workers and payment of pending bills of government contractors.
“What is important is that money should reach their hands in one way or another,’’ he said, prompting opposition leader V D Satheesan to term the claims about the entire Rs 20, 000 crore package a hoax. Additional resource mobilisation for announcements made in the revised budget was not listed in the revised budget estimates, he said.
Balagopal presented a Rs 1866.79 cr deficit budget, which showed an additional expense of only Rs 1,715 cr from the one presented in January. The minister, however, said he was open to queries and criticism of the opposition besides promising to engage in dialogue with them.
“It’s true that the new finance minister had very little elbow room as he presented only a revised budget. But, it is surprising that there is no attempt to address the burgeoning debt. The revenue and fiscal deficit of the state have increased by 60% as per the latest data. Even if he is wary of introducing new taxes, he could have definitely attempted certain measures to cut the government expenditure," state finance commission former chairman B A Prakash said.
The budget promised to address the new challenges faced by the education sector and promised to speed up KSFE's laptop purchase scheme. At the same time, in a major departure from the original scheme announced by Isaac in the last budget, Balagopal said the government has dropped plans to develop a `modern digital platform' to link potential job seekers with global companies, under the Knowledge Economy Mission. He said the government would roll out the project in association with the existing recruiting agencies and their platforms to leverage the Work from Home (WFH) concept in vogue.
\Public finance expert and social scientist Ram Mohan said the new finance minister should be congratulated for having presented a fairly transparent and honest account of Kerala’s public finance. However, he said the budget should have explored steps to improve the tax administration. "Failure to collect tax is a major problem. Uncollected taxes of the state amounts to Rs 20,000 crore,’’ he said.