Kerala Budget 2018-19 start with a remark ‘universal social security, sustainability and comprehensive infrastructure development are the hall marks of LDF Government’. Budget 2018-19 also remarks ‘the beginning of a comprehensive coastal development package. Budget feels that miseries sown by ‘Ockhi’ and uncertainly created by economic slowdown put Finance Minister Mr. Thomas Issac in distress. Hence FM announced a coastal area package of ‘2000 crores and an anti recession KIIFB project package for ‘54,000 crores. On general economic condition, Kerala budget 2018-19 remarks that like ‘Ockhi’, demonetization devastated Indian economy. GST was a severe blow to the stressed economy reeling under demonetization. Kerala Finance Minister argued that states tax revenue will increase by 20 to 25% on introduction of GST. He also envisaged that states’ tax collection will increase on an average annually by ‘3000 crores. But now FM tells that tax collection increase by only 10% and if we add the compensation also state GST will increase by 14% only. F M who first welcomed the GST now critically cry that state has no power to alter tax rates to raise additional resource. Mr. Thomas Issac in his budget mention that growth rate of tax on petrol, registration and stamp duty stand at low level. Total revenue receipts increased by 7.7% only while plan expenditure increased by 22% and non plan expenditure by 21%. It finally increase the gap between revenue and expenditure and push the state to fiscal deficit.
Measures initiated for reducing deficit are (i) additional resource mobilization of ‘970 crores and (ii) reducing non plan expenditure. Control on post creation, vehicle purchase, travel expenses and telephone bills are suggested for expenditure control. FM, however, fail to estimate the total resource that could be saved through expenditure control. However, it is quite interesting that FM has cleverly announced an additional expenditure of ‘915 crore in the 2018-19 budget. Revenue deficit estimated in 2018-19 is at ‘12859 crores which shows a reduction of ‘220 crores over 2017-18. Is it a great budget success?
Budget 2018-19 is also based on two assumptions (i) more capital investment through KIIFB, (ii) GST, if implemented effectively, tax revenue will increase considerably.
While presenting the budget 2018-19 FM expect more resources and projects from KIIFB for capital investment which would correct fiscal discipline. Budget 2017-18, envisaged proposals for ‘54000 crore through KIIFB. Out of it, project worth ‘20,000 crore are near execution and projects worth ‘10,000 crores are near sanction. In other words, KIIFB projects valued ‘30,000 crore will start to work in 2017-18 and projects for ‘24,000 crores will start in 2018-19. FM expect KIIFB investment as antidote to fiscal recession and a stimulant to economic growth.
Here KIIFB raise resource as loan and it has to be repaid with interest. Budget 2018-19 explains that assuming 9% interest (only assumption) three years moratorium and 7 years repayment period, ‘1 lakh crore have to be repaid. The KIIFB Act envisage that Fund Board has to get ‘ l lakh crore as grant by way of share of petrol cess and motor vehicle cess, before the repayment period. KIIFB’s resource mobilization measures are different kinds of bonds from domestic market, investment fund from abroad, and NRI chitts of KSFE. State economy is growing at around 7 to 7.5% annually and running at a fiscal deficit of 3.3% of GSDP and public debt liability going to cross ‘ 2 lakh crore by 2017-18 end. Similarly 70% of State revenue expenses are for salary, pension and interest. How can such an economy repay the KIIFB project liability? Are we moving towards a better Kerala with world class infrastructure? Or, Are we moving towards a total financial crisis when KIIFB repayment starts.
Budget 2018-19 envisage total social security which include housing for all, hunger free Kerala, better education, free medical treatment and social welfare pension. Hunger free Kerala is a good slogan. But states’ public distribution system is in total disarray particularly over the last two years as we fail to implement the National Food Security Act 2013. We can hope that Food Security Act 2013 will be implemented before 2019-20 budget since it ensure the food security of millions of poor keralities.
Life Mission is one social security scheme to provide house for all houseless people. Data shows that 4.21 lakh people don’t have habitable dwelling and 3.38 land less people have no houses. Big amount of ‘2500 crores is earmarked for life mission in 2018-19 budget. While budget earmark a huge amount (‘2500crore) for house for houseless there is no nodel agency to co-ordinate the process involved particularly target and achievement.
Budget 2018-19 earmark ‘1685 crore under plan for comprehensive health security. Target is to become Kerala the first state in India that ensures ‘Universal Health Security’. KIIFB fund and resource from lottery are envisaged. KIIFB fund is envisaged to enhance treatment facilities in Medical Colleges, General, District and Taluk hospitals. The budget 2017-18 proposed 8000 new posts in hospitals for improving health facilities, ‘2000 crore KIIFB fund for General, District and Taluk hospitals and ‘350 crore for assistance to patients from Karunya lottery. Here we understand that every year budget make promises without reviewing what have been achieved. Similarly LDF government has formulated its health policy which envisage to spend 5 to 6% of GSDP in health sector. Once the health policy become operational what will happen to budget promise. When the budget aim at universal health care each category of health care institution in all regions must have ‘uniform facilities’ like medical staff, medical equipment, laboratory, buildings, drinking water, toilet, furniture, beds and above all medicines and equipments. In order to provide these facilities, each category of health institution must have a ‘master plan’ to be implemented in a phased manner. Unless it is clearly defined with a target, budget promises would remain as dreams as in the past.
General education is vital and master plan, as mentioned in the budget, for each school on learning, curriculum related and extracurricular activities is good. High-tech class rooms and IT labs are also good. KIIFB fund is proposed to be mobilized for infrastructure creation in schools. Upgradtion of schools in to World Class Standards and Centres of Excellence are used past words and slogans. Education policy must concentrate on improving the academic quality of teachers first and then quality of students instead of slogans. In the present socio-politicaleconomic setup quality improvement is a major challenge and the budget 2018-19 is silent on it.
In public works, Electricity Board, Water Authority and KSRTC, KIIFB has strategic role in investment. In PWD, KIIFB takes up 561 works worth ‘24390 crores. KIIFB will purchase 3000 buses for KSRTC, 1000 in 2017-18 and 2000 in 2018-19. In KSEB, KIIFB will take up 2 trans-grid projects worth ‘5200 crores.
Budget 2018-19, as analysed above, indicate that KIIFB make strategic inroad in to vital departments like PWD, KSEB, KWA, health, education and KSRTC with capital investment. If the trend continue in the coming years as well, KIIFB will acquire the strength to dictate the above departments. It indirectly means the strategic control of FM on these departments.
FM conclude the 2018-19 budget with a statement that budget attempt to move Kerala towards tomorrow with its strength and virtues. FM adds, budget stands with weaker section and our social security would make ‘again’ Kerala a Model for India. New generation employment, world class infrastructure and financial discipline envisaged in the budget 2018-19 has become the development approach of LDF.
Is it a Slogan or a promise. It can be either.
Author is a senior economic analyst and Registrar of Rajiv Gandhi Institute of Development studies, Trivandrum.