The Kerala government will have to borrow heavily to honour the salary and pension commitments of about Rs. 3,100 crore for December.
The slump in tax collection from 17 per cent in October to 13 per cent in November following demonetisation is feared to further slide to a single digit by January.
The government’s calculations may go awry and it will be forced to avail itself of at least Rs. 2,000 crore for meeting the routine commitments for December.
If the crisis that has gripped the State’s economy is set to deepen in the months ahead, the fiscal situation will be much more grim.
The government may not have the wherewithal to meet the day-to-day expenditure and may be forced to go in for a Plan cut.
Development projects slated for the year may have to be scrapped or shelved.
The government has not yet taken a call on such serious issues, but will have to seriously consider it, say informed sources.
The currency crunch has taken a heavy toll on retail trade and services sector.
The Reserve Bank of India (RBI) was unable to ensure cash supply for paying the salary in the first week of December, according to the sources.
