The COVID-19 pandemic has inflicted a shock to the economy and severe stress on State finances, with Kerala’s economy suffering a Gross State Domestic Product (GSDP) loss of ₹1,56,041 crore in 2020-21 in relation to Budget Estimate 2020-21.
The contraction in GSDP could have been more severe but for the economic stimulus of ₹20,000 crore announced at an earlier stage of the pandemic in March 2020. This stimulus package targeted the most vulnerable and also benefited the entire society and greatly reduced the impact of COVID-19 on GSDP.
This has been stated in the 2021-22 Medium Term Fiscal Policy and Strategy Statement and Medium Term Fiscal Plan for 2021 to 2024 tabled in the Assembly by Minister of Finance K. N. Balagopal on Friday.
The lockdown impacted the State finances adversely especially during the first quarter of 2020-21. With the gradual lifting of restrictions, the economy regained growth momentum close to pre-COVID-19 level by the end of the year 2020-21. Assuming a higher GSDP growth following an economic crisis after a pandemic, GSDP is projected at 6.6% in 2021-22 Budget Estimate.
State’s Own Tax Revenue is estimated to grow at 6.5% over the Budget Estimate 2020-21. Encouraging GST collection is a sign of faster economic recovery.
V-shaped recovery
The government is planning to quickly start sectors like Tourism, MSME, Agriculture to ensure a ‘V’-shaped recovery and generate employment. Capital Expenditure will be enhanced both through the KIIFB and Externally Aided Projects. Development and welfare measures will continue. Health protection will be given top priority in view of COVID-19. Improvement of the quality of higher education will be given priority.
State’s Own Tax Revenue is projected to grow at 14% in the forward estimates period. Non-tax revenue is projected to grow at 15%. Measures being taken in sand mining and quarrying will help the State in the mop-up of Non-tax Revenue.
The share of Central Taxes is projected to grow at 15%. Revenue expenditure is estimated to grow at 7.5% and 9.3% respectively in the forward estimated period, which is reflective of the thrust given to Health, Education and Social Sector spending. Capital expenditure is estimated to grow at 14% and 12 % for the years 2022-23 and 2023-24 respectively.
