State budget to have modest Plan size


Action plan to combat recession threat to be unveiled

With a realistic and modest Plan size, the State Budget for 2020-21 will unveil an action plan for mopping up the unrecovered tax revenue, raising tax collection to 20% and further jacking up infrastructure spending to combat the looming recession threat.

Finance Minister T.M. Thomas Isaac who has started the budget preparation told The Hindu on Sunday that the Centre has already called for 40% Plan cut and initiated a slew of other austerity measures to contain the woes of recession.

The State will not wait for the recession to wane, instead further boost up infrastructure spending and explore other options to rein in revenue expenditure.

Revenue expenditure

The revenue expenditure of the government has been growing from 10 to 14% over the years and the income remains at 10%. The challenge is to contain the 4% gap which would inevitably lead to a ways and means problem.

The Centre’s indifference to the State’s plea to raise the annual borrowing limit is a major challenge.

“The flawed implementation of the Goods and Services Tax (GST), mainly without an effective tax administration mechanism, has rattled the expectations for raising income. An enforcement system to check the revenue leak is still not in place. Unlike manufacturing States like Maharashtra, Telangana, Karnataka and Tamil Nadu, Kerala is only a consumer State and the revenue leak is high. An all-out bid will be made for mopping up the tax revenue after scrutinising the GST returns filed in December and also Value Added Tax arrears. This will have a cushioning effect on the State’s finances,” Dr. Isaac says.


A cut in posts is not on the anvil, but a thorough redeployment of staff is inevitable.

As many as 1,000 employees of the Local Self-Government Department, including DRDA and Performance Audit, will have to be moved to local bodies.

Staff of defunct projects in various departments, including Irrigation and Education, would be redeployed where there is a manpower paucity. The working arrangement system will be brought to a complete nought.

The Plan size would not be too big, but quite realistic. Rather than fixing a huge Plan and then slashing it in the face of a severe resource crunch it is desirable to fix a size that suits the current financial situation.

KIIFB factor

The reliance on off-budget mechanism Kerala Infrastructure Investment Fund Board (KIIFB) would continue.

“It has become so integral to the State’s development and no government in future would be able to relinquish it. The functioning of KIIFB, KSFE, KFC and the Kerala Bank have all won accolades for the government and it will be thrust areas,” Dr. Isaac says.

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Printable version | Jan 29, 2020 10:35:52 PM |

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