Amidst evident distress, Plan B is a must
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Kerala Finance Minister K.N. Balagopal began his budget speech yesterday with an introduction that shared a significant piece of reassuring news for the people of Kerala. The news was that Kerala had overcome the severe phase of the intense financial crisis that had handicapped the state government in recent years. It is important to note that this is the final full budget of the second Pinarayi Vijayan government, presented just before the local self-government elections. Naturally, one would expect a series of popular announcements and new approaches. These could include an increase in welfare pensions, additional benefits for government employees and pensioners, the announcement of a new pay revision commission, relief measures beyond those already announced for the rehabilitation of the Wayanad disaster, and the introduction of new projects to accelerate the state's economic structure and development. However, when the budget speech concluded, the overall outcome was one of disappointment. There were no significant announcements on any of the aforementioned topics; instead, there were only repeated promises to clear pending arrears in welfare pensions and other areas in a time-bound manner. Beyond the Finance Minister's "reassuring news," his announcements clearly indicate that the state is still grappling with a financial crisis. If that were not the case, there should have been at least some popular announcements on the issues mentioned above. Moreover, nothing in the budget speech could be construed as validating the argument that the state is freeing itself from the financial crisis. On the other hand, the responsibility for improving the state's financial condition has been shifted onto the common people by imposing tax increases on various sections of society.
The financial crisis is evident, and its causes are clear. The first culprit is the central government itself. The share of tax money collected from the state is decreasing every year. The share, which was 3.88 per cent during the Tenth Finance Commission, has decreased to 1.92 per cent in the Fifteenth Finance Commission. The Central Finance Commission also made drastic cuts in the grants allocated to local governments. The share for local bodies has been reduced from 4.54 per cent to 2.68 per cent. The situation with GST is even worse. With the advent of GST, the state's right to levy taxes by setting its own rates was lost, and the state also suffered a severe decline in revenue. The GST compensation system, which was designed to compensate for this decline, has also come to a complete standstill. On top of all this is the complete neglect in the central budget. It has been Kerala's experience for the last 10 years that the Centre is implementing a kind of financial embargo. There are only two ways to overcome this: one is borrowing. But with the Centre also interfering in the borrowing limit, the only way left is to tighten the grip on non-GST tax items as much as possible. In fact, that is what was seen in this budget. The government's policy has become to find its own revenue to resist and overcome the central financial embargo. The government has been very successful in increasing tax and non-tax revenue. The target is to increase the tax and non-tax revenue from 54,000 crores to one lakh crore in four years. To some extent, this is good. But this method can only solve a quarter of the decline in the central share. Even then, the distress will continue. The finance minister said in last year's budget that a 'Plan B' would be implemented to solve it. There is no mention of such an alternative system in this budget. Instead, the government is again imposing a tax burden on the common man who is suffering from the financial crisis. In a sense, this situation can also be assessed as the misfortune of our state and government. Look at the case of the Wayanad rehabilitation package itself. The Wayanad disaster is listed among the most dangerous unusual weather events reported globally. What is primarily needed for rehabilitation is more than two thousand crore rupees. Not a single rupee has been received from the Centre for this purpose so far. The project had to be reduced to Rs 750 crores as the state government was unable to allocate this much amount. The situation is the same in other sectors as well. In this situation, there is no point in blaming the state government for the financial crisis. At the same time, the fact that the lack of planning is evident in many areas cannot be hidden.
The budget envisions short-term plans for one year and long-term plans for a quarter of a century. It remains to be seen how practical this will be given the current economic crisis and "blockade." At the same time, the budget includes many plans that recognize the needs of the future of Kerala. In addition to infrastructure development and basic development, the budget's inclusion of climate change, artificial intelligence, and Kerala's unique demographic evolution is encouraging. Several studies have already come out highlighting the serious consequences that the state's declining birth rate and increasing elderly population will have on the future of Kerala. Plans to thoughtfully address these warnings and to transform them into new opportunities are to be welcomed. Even then, a question remains: How will we overcome this hardship? We can wait for reassuring news.