Kerala has much to worry about budget

March 01, 2015 12:00 am | Updated May 23, 2016 03:48 pm IST - THIRUVANANTHAPURAM:

Kerala appears to have much to worry about the budget, besides Union Finance Minister Arun Jaitley’s failure to respond positively to the pre-budget wish list of the Oommen Chandy government.

Key among the demands placed before Mr. Jaitley was the need to actively discourage import of natural rubber by hiking its import duty from the present 20 per cent to 30 per cent. The Finance Minister has skirted the issue in his budget speech.

He has also not responded to the State’s plea for an All India Institute of Medical Sciences (AIIMS), for which it had indicated four possible sites in Thiruvananthapuram, Kottayam, Ernakulam, and Kozhikode to choose from.

Resource devolution

These are but specifics. Even more worrisome for the State could be the implications of the theory and practice of budget-making that Mr. Jaitley has resorted to and the way the Centre’s perceptions about planning and resource devolution are likely to impact the quantum of funds that the State would get during 2015-’16.

The quantum of Plan funds that would be transferred to the States would in all probability be less in the coming year as compared to 2014-’15 as the Plan allocation for 2015-’16 has been pegged at Rs.4,65,277 crore, which is Rs.1.10 lakh crore less than the Rs.5,75,000 crore estimated for 2014-’15. The State Plan is dependent heavily on Central Plan assistance and any fall in the amount available would hurt the Plan process in the State.

Tax mop-up

On the tax devolution front too there is cause for concern. The total sum expected as State’s share of taxes during the current year is Rs.9,365 crore.

The State might well end the year with a lower sum given the shortfall in Centre’s tax mop up. On top of this would be the impact of the 5 per cent tax deduction granted to the corporate sector in the budget.

The estimated devolution under this head during this year is Rs.3,241 crore.

By normal logic, the 5 per cent cut can mean trouble for the State.

On the other hand, the State may not derive much benefit from the hike in Service Tax as it would get only a few hundred crores more than the estimated Rs.1,530 crore (2014-’16) in the coming year.

The 2 per cent surcharge on tax payable by the super-rich would benefit the States only if the Centre decides to share the additional income with the States. A lower customs duty regime would also mean lesser funds for the State in a low oil price scenario and consequent fall in import duty earnings.

That the Finance Minister has announced the roll-out of Goods and Services Tax (GST) next year leaving details about the compensation package for States should also leave State administrators with a heavy load of work on hand.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.