Finance Minister K.N. Balagopal presented the second Pinarayi Vijayan government's final budget through a lengthy speech. With Assembly elections approaching, it is only natural that the budget resembles a political manifesto rather than a concrete economic roadmap for the state’s future. The Finance Minister undertook a ‘Bhagiratha-like effort’ to win over voters through welfare schemes. The Left Front's political strategies aimed at securing a third term of successive government are reflected throughout the budget. However, the Economic Survey Report does not offer an encouraging answer to the question whether Kerala’s treasury has the financial capacity to implement these promises. As a result, considering the current debt burden and revenue sources, economic experts remain sceptical about the practicality of the budget’s promises. They also criticise the Finance Minister for prioritising short-term populism over sound economic policy and a long-term vision.
The welfare measures promised in the budget, which projects revenue of Rs 1.82 lakh crore and total expenditure of Rs 2.4 lakh crore, risk turning into empty assurances or imposing an excessive burden on the next government. Kerala’s revenue deficit stands at Rs 34,587 crore, or 2.12 per cent of the state’s GDP, while the fiscal deficit is Rs 55,420 crore, or 3.4 per cent of state GDP. The government expects increases of Rs 45,889.49 crore in revenue receipts, Rs 10,271.51 crore in its own tax revenue, and Rs 1,595.05 crore in non-tax revenue. Unfortunately, the state’s current financial condition does not support such expectations. Own revenue growth has remained stagnant to some extent over the past three years. Growth rate remains below the national average (currently 6.17 percent). Public debt has reached to a record high. In the same context, the budget announces allowances, group insurance schemes, and welfare benefits with cash components that raise significant expectations among ordinary people. While their implementation may yield political dividends, it will further increase the state’s debt burden. Otherwise, plan funds will need to be slashed, or promises will have to be dropped after the election. Currently, only less than 40 percent of the plan fund has been spent. Several schemes intended to benefit the public, including scholarships for SC and ST students, have been shelved due to a lack of funds.
The Economic Survey Report provides a clear warning about the state's financial limitations; It forces the government to adopt strict financial discipline. Only a substantial increase in own revenue can avert the debt crisis. However, when this realistic awareness from the survey came to the budget speech, the Finance Minister had to abandon it. No concrete plans were presented to boost revenue, as election preparations took priority. With the Centre tightening borrowing limits, the source of funding for welfare schemes remains a major question. While salary revision and DA increases have been announced, the budget remains silent on viable methods of financing them. The government views the revision of land fair value as a key revenue source. This is likely to inconvenience the public and the middle class,; in addition, ggressive recovery of tax arrears could also trigger public resentment. The Centre's economic neglect is the main reason for Kerala's development stagnation and inability to implement welfare schemes. In this connection, the Opposition should also support the government’s efforts to expose the Centre’s approach, which undermines federal principles. Even if there is a change in government, the Centre’s stance will continue to affect the interests of states. Over the past four years, the Centre’s share has declined from 34 per cent to 25 per cent. The right path to development is not borrowing; what is needed is to secure the due share withheld by the Centre and develop own revenue. While the Finance Minister has succeeded in presenting attractive welfare schemes, he must also acknowledge his failure to identify reliable sources of revenue.