State’s fiscal strain eases as Centre releases funds

The focussed political initiatives of Kerala for securing transfers due from the Centre seem to have offered a reprieve and temporarily eased the strain on State finances.

Complementary and sustained political efforts taken up at the behest of the Left Democratic Front government have prompted the Centre to release the Revenue Deficit Grant awarded by the 15th Union Finance Commission and also clear the ₹2,048-crore Goods and Services Tax compensation arrears from December to February.

Front-loading of loans in the first month of the current financial year also helped the government buttress the strain induced by COVID-19, which was threatening to snowball into a total collapse.

The COVID-19-induced fiscal impasse is far from over and if the Centre again decides to curtail the loans as done in the previous year, the State may slip into a grave resource crunch yet again. The restrictions imposed by the Centre during the final quarter of the past financial year had caught the State unawares and the government had to strive hard to overcome a shortfall of ₹8,000 crore in its expected income.

Since the State is set to switch over to poll mode, with the local body elections in October and Assembly polls next year, the government could ill-afford to shelve major projects and will also be compelled to effect a lot of cash transfers. Hence it has become imperative to ward off a crisis.

The pioneering efforts of Kerala followed by an action plan to mobilise the support of non-BJP-ruled States had ultimately coaxed the Centre to release a fixed quantum of revenue deficit grant and also the GST compensation arrears.

Political moves

Such political moves have ensured a consistent flow of revenue from the Centre. But for such efforts, the dip in Central revenue would have deeply impacted the State.

A series of meetings of non-BJP-ruled States convened here and subsequently in Vijayawada and Puducherry challenging the terms of reference of the 15th Union Finance Commission and a memorandum submitted to the President have all had their impact.

Lifting of lockdown curbs is expected to revive economic activity and once the revenue streams from excise and other sources are revived, the government is expected to have a smooth sail in the months ahead, sources said.

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Printable version | Dec 7, 2021 2:02:40 AM |

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