Kerala economy in a perfect storm; economic review reveals mismatch between promises and reality

A. Harikumar

Not many aimed brickbats at Kerala finance minister K N Balagopal after he presented the budget for 2022-23 in the state assembly on March 11, Inside the assembly the opposition listened to the 2.5 hour long banal presentation of the minister with stoic silence. Not once did the opposition heckle him. However, that doesn’t testify the faith of members in the finance minister. The responses were mellowed because Mr. Balagopal didn’t announce many new taxes.

Afterwards, the opposition leader V.D Satheeshan castigated the finance minister for his purported insincere approach in the budget, Mr. Satheeshan pointed out that the state is on the verge of a financial breakdown. Instead of tabling the economic review on the eve of the budget, as was the vaunt, the government postponed it, and presented along with the budget, he said. That might have been done to prevent the opposition from coming to the house armed with disturbing statistics on economy at the time of budget presentation .

A hard look at the budget figures reveal a shocking state of affairs of Kerala economy. If that is read together with the statistics provided in the economic review for 2020-21, the picture that emerges is really appalling and finance minister has turned a blind eye towards unpleasant facts, instead of prescribing bitter pills for solving the malady.

What indicators say?

So what do economic indicators say? Let’s check.

According to the economic review of 2020-21, The State Domestic Product recorded a negative growth of -9.2 percent during the financial year 2020-21.The per capita income has fallen down like never before. There was a dip of Rs 16,000 in terms of per capita income. It came down from the previous Rs 1.62 lakh to Rs 1.46 lakh. Service sector, which includes tourism declined by 9.2 percent. Construction sector decelerated recording a growth of -10.5. The previous year the decline of construction sector was by just 1 percent. Industrial production recorded a negative growth of -8.9 percent Ironically the economic review claims the decline in growth was limited to the above level due to the Rs. 20,000 bailout package.

Unkept promises

However, opposition leader V. D Satheeshan has a different story to tell. He debunked the claims of the government saying the government had done little to implement the promises in the previous budget. Of the Rs 20,000 crore Covid bailout package, just Rs 172 crore was spent, Satheeshan alleged

He observed that the government has a lackadaisical attitude in collecting taxes despite the acute shortage of funds. Against an expected spike of 30 percent in revenues after GST implementation, the actual increase was just 10 percent, he said. He further pointed out that there is a fall of Rs 30,000 crore in tax collection compared to the budget estimates of last year.

Unspent allocations

A huge percentage of the amount allocated in the previous budget has not been spent, according to opposition leader. While the government collected Rs 2190 crore as flood cess for its Rebuild Kerala project, the money was diverted. Similarly the Rs 1780 crore received as first tranche of loan from the World Bank was also diverted for paying salary, he said. Of the Rs 1830 crore earmarked in the previous budget for Rebuild Kerala only Rs. 388 crore was spent, added the opposition leader. He further noted that less than 51 percent of the funds earmarked for local self government bodies have been spent. Similarly, only 67 percent of the Rs 9432 crore earmarked in the last year’s budget for the centrally drafted projects has been spent. If the funds are not fully spent, then the central government won’t allot their contribution, pointed out Mr. Satheeshan.

Meanwhile, the unemployment rate among the youth in the state belonging to 15-29 years age group has risen to a shocking 35. 4 percent. The unemployment rate among males is 26.5 percent and women 53.7 percent. The unemployment rate among those aged between 15 and 59 in the state is 10 percent according to the economic review against the national average of just 4.8 percent Similarly the unemployment among the educated in Kerala is 16.7 percent while the national average is 10.1 percent. The indicators are ominous. The government cannot solve the problems by postponing the implementation off remedies, say economists.

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