Centre’s policy root cause of Kerala’s economic crisis: FM Balagopal

Thiruvananthapuram: Kerala Finance Minister K N Balagopal, during the budget presented by him in the State Assembly here on Friday, attacked the BJP-led Centre by alleging that its policy was the root cause of the economic crisis in the southern state.

In his budget speech, Balagopal claimed that the centralisation of power and disregard for states, especially Kerala, has increased in an unprecedented manner.

Launching a scathing attack on the Centre, Balagopal, also a prominent leader of the state’s ruling CPI(M), said that change in fiscal federalism that goes against the spirit of the Constitution was a more serious threat than any other issue.

“During the tenure of the 10th Finance Commission, the share of Kerala was 3.875 per cent of the divisible pool to be distributed among the states. By the time of the 15th Finance Commission, it came down to 1.925 per cent. Through this, the Union government cut down the revenue of Kerala by tens of thousands of crores,” he charged.
The minister said there is a shortfall of around Rs 6,700 crore due to the reduction of the Revenue Deficit Grant by the Union government.

“As a result of the cessation of GST compensation, there has been a shortfall of around Rs 7,000 crore during the current fiscal. As a result of the policy of the Union government treating Public Accounts as debt liability, there is a revenue loss of around Rs 10,000 crore per annum,” Balagopal said.

He said the policy of treating the liability of institutions like Kerala Infrastructure Investment Fund Board (KIIFB), Social Security Pension Limited, etc., which raise funds from outside the budgetary allocation as that of the state, is also limiting the government’s borrowing capacity.

“There will also be a shortfall of Rs 3,100 crore on this account. Due to the restriction on the market borrowing limit, there has been a shortfall of around Rs 4,000 crore in the resource mobilisation,” the minister said.

He said it is anticipated that the fiscal constraints in 2023-2024 will be more than that of the current year. “This is because of the anticipated shortage of Rs 8,400 crore in Revenue Deficit Grant compared to 2022-23, the loss of around Rs 5,700 crore due to the cessation of GST compensation, the resource loss of around Rs 5,000 crore due to the restriction on the borrowing limit as well as the reduction on account of the debt likely to be borne by KIIFB and the Social Security Pension company during next year,” Balagopal said.

As the state recovers from the economic crisis and is on the path of growth, the fiscal policy of the Union government will adversely affect growth prospects, he added.

Stating that Kerala is countering serious constraints, he said in the current scenario, the state cannot surpass the strict and rigid norms stipulated by the Centre.

“The taxation powers of the state are limited. The borrowing powers are also strictly restricted. We have to understand the situation and move forward irrespective of party politics,” he said.

Balagopal said the state government was not of the opinion that loans should be given to debt-ridden corporates from the hard-earned money of common people by investing it in various financial institutions.

“Our opinion is that the Central and the State governments shall carry out more developmental, welfare activities by availing more loans. But the Union government is reluctant to relax the conservative stance,” he said.

Balagopal said the Left government considers the conservative financial policy enforced by the Union government as the biggest challenge to the alternative development model of Kerala.

“But we are not ready to abandon our alternative model or its virtues in spite of the hurdles posed by the Union government. Kerala has not reached here without facing any crisis,” he said.

A significant change towards the financial developmental planning approach is required to survive this new situation that has arisen due to the curtailing of the fiscal space, he added.