Signifying a shift in fiscal policy of the State government, Finance Minister K.M. Mani on Thursday introduced a Bill in the Assembly to amend the Kerala Fiscal Responsibility Act of 2003 to set a new target of eradicating revenue deficit in the budget exercise by degrees by 2014-15.
The House referred the Bill to its Subject Committee for vetting after a three-hour discussion. The Bill represents a deviation from the former LDF government's approach of “borrowing more to feed growth.” Mr. Mani said the achievement of these targets would ensure the flow of Rs.1,935 crore of Central assistance to the State from 2011-12 to 2014-15.
Mr. Mani said the intention of the Bill was to achieve the fiscal discipline targets proposed by the 13th Finance Commission and thereby avail the debt relief support the Centre would extend to the State for achieving them. All other States in the country were falling in line with the Central directive to eradicate revenue deficit and Kerala would lose out on Central assistance if it pursued a different path, he said.
The revised Budget for 2011-12 the UDF government had passed soon after coming to power earlier this year had put the revenue deficit at Rs.5,533 crore, which is 1.8 per cent of the State's Gross Domestic Product (GDP), down from Rs.6,019 crore, or 1.9 per cent of the GDP, proposed in the Budget for the same year presented earlier on behalf of the former LDF government by its Finance Minister T.M. Thomas Isaac.
The Kerala Fiscal Responsibility Bill (Amendment) Bill, 2011 envisages bringing down the revenue deficit to 1.4 per cent of the GDP in the current financial year and to 0.9 per cent in 2012-13, 0.5 per cent in 2013-14 and zero per cent in 2014-15. Likewise, it proposes maintaining the fiscal deficit at the level of 3.5 per cent of the GDP in the current financial year and in 2012-13 and reducing it to three per cent in 20123-14.
The Bill also proposes reducing the State's total debt liabilities to 29.8 per cent of the GDP within a period of four years, by bringing them down from last financial year's level to 32.3 per cent this financial year, 31.7 per cent in 2012-13, 30.7 per cent in 2013-14 and 29.8 per cent in 2014-15.