In the long shadow of demonetisation, Finance Minister T.M. Thomas Isaac has presented the first full Budget of this government. The macro indicators in the State’s public finance are visibly dull. Revenue deficit has crossed ₹16,000 crore. Last year it was about ₹14,000 crore. Over 75% of the public account has been spent to finance the deficit. In the annual Plan, the capital expenditure has been considerably slashed. The only ray of hope for the Finance Minister is the introduction of Goods and Services Tax (GST) next year. He expects that it would take care of the revenue deficit to a large extent so that capital expenditure can be enhanced.
In his last Budget, Dr. Isaac had put forward a ‘Plan B’ in the event of GST not being rolled out, by introducing the idea of the Kerala Infrastructure Investment Fund Board (KIIFB). This year he has firmed up the KIIFB route through passage of an Act and roping in experts such as former Comptroller and Auditor General of India Vinod Rai, former RBI deputy governor Usha Thorat and former NABARD chairman Prakash Bakshi.
The KIIFB plan is the most important strategy spanning the development projects envisaged in this Budget. The Finance Minister claims that NABARD has agreed to cooperate with KIIFB by contributing ₹4,000 crore through bonds. Next year, he expects that the KIIFB plan will result in investment of the order of ₹25,000 crore.
An out-of-the-Budget route like the KIIFB, circumventing the hassles of public borrowing by the government, is not a bad idea. Generally, this route is utilised for implementing projects with a clear business model using Special Purpose Vehicles (SPVs). But Dr. Isaac is experimenting this public finance innovation for too many purposes, ranging from construction of roads, bridges, and school classrooms to big ticket physical infrastructure.
Isaac’s dream
He dreams that the two million NRIs in the Gulf region will join chit schemes floated by the Kerala State Financial Enterprises (KSFE) and the extractable money in this chit pool will be more than ₹12,000 crore. Unfortunately, the Minister is not clear how would he repay the sums to be drawn from the chit scheme.
Moreover, the ‘Plan B’ has become bigger than the traditional annual Plan (call it ‘Plan A’). The main criticism of the Left parties against the BJP-led Central government is that it is replacing the prestigious Plan process with a few fancy project proposals. In the traditional planning process, when the State spends money on development, it is duty-bound to apportion a certain percentage of the outlay for the weaker sections such as SCs and STs.
But the Left government in Kerala is side-stepping the traditional Plan process and, knowingly or unknowingly, slipping towards the BJP government’s development strategy. The LDF leadership will be compelled to answer quite a few unpleasant questions questions about this change of track sooner or later.
(C.P. John is former member, State Planning Board)
