Planning Board survey paints a grim picture as Mani presents Budget today

The Economic Review for 2012, brought out by the State Planning Board on the eve of the State Budget, has indicated that Kerala will continue to grapple with high non-development expenditure, revenue deficit and increasing debt burden in the coming years.

“Unproductive revenue expenditure should be reduced and capital expenditure should be encouraged. A zero revenue balance, if not a revenue surplus, should be targeted so that borrowed funds are used for asset creation. Prudent debt management will be necessary as Kerala is more vulnerable to indebtedness than many other States,” the report, released here on Thursday by Finance Minister K.M. Mani and Planning Board Vice-Chairman K.M. Chandrasekhar, said.

Read along with this year’s Union Budget proposal to compress Plan expenditure and reduce subsidies across the board, the Economic Review does not actually present a rosy picture for Finance Minister K.M. Mani when he presents his 11th Budget in the Assembly on Friday.


The survey says the increase in Plan and non-Plan revenue expenditure during 2011-12 was large compared with the prevailing trend. Non-Plan revenue expenditure increased to Rs. 40,717 crore in 2011-12 from Rs. 30,469 crore in 2010-11, registering a 33.6 per cent increase over the previous year. Plan revenue expenditure increased to Rs. 5,327 crore in 2011-12 (27 per cent) from Rs. 4,195 crore. The actual revenue expenditure of Rs. 46,045 crore exceeded the Budget estimates of Rs. 44,961 crore by 2.4 per cent. The survey said the ratio of revenue expenditure to the Gross State Domestic Product (GSDP) declined persistently from 14.2 per cent in 2007 to 12.5 per cent in 2010-11. But the trend reversed and it went up to 14.1 per cent in 2011-12, mainly due to the expenditure on salary and pensions which were revised in 2011-12. As a result of the absorption of these outflows, the increase in salary and pension expenditure in 2011-12 over 2010-11 was 45.3 per cent and 50.8 per cent, respectively.

The report referred to the sharp increase in payment of subsidies for the past five years, from Rs. 202 crore in 2007-08 to Rs. 1,014 crore in 2011-12 (400 per cent). In 2011-12, the payment of subsidies increased by 62 per cent over the previous year, mainly on account of the increase in payments for subsidised ration rice and wheat (Rs. 650 crore) and the special support scheme for the farm sector (Rs. 108 crore).

The report pointed out that the share of development expenditure as part of the total revenue expenditure improved marginally to 55.3 per cent in 2011-12 from 54.6 per cent in 2010-11. However, there is some consolation when it comes to capital expenditure, which went up to Rs. 6,555 crore in 2012-13 (Budget estimate) from Rs. 3,843 crore in 2011-12. The ratio of capital outlay to the GSDP as per the budget estimate for 2012-13 was almost 1.7 per cent.

Debt profile

As for the debt profile of the State, the report pointed out that only a small portion of the funds borrowed in 2011-12 was available for development. Debt reached Rs. 89,418 crore in 2011-12, with the annual growth rate of debt increasing by 13.7 per cent in 2011-12 against the 10.9 per cent in 2010-11. The per capita debt of Kerala which was Rs. 15,700 in 2007 increased to Rs. 24,600 in 2011.

The report said the GSDP at factor cost at constant prices (2004-05) registered a growth rate of 9.5 per cent in 2011-12, which is the highest among the southern States. At current prices, the growth rate is nearly 17 per cent. The per capita GSDP at constant prices recorded a growth rate of 8.8 per cent. At current prices, this has been estimated to be 16.2 per cent. The contribution from the primary, secondary and tertiary sectors to the GSDP at constant prices was 9.5 per cent, 20.2 per cent and 70.2 per cent, respectively.

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