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All Is Not Well With Kerala’s Finances CAG – Free PDF Download

 

The Terms

  1. Revenue  deficit = Total revenue expenditure – Total

revenue receipts

  1. Fiscal  deficit  = Total expenditure – Total receipts

excluding borrowings

  1. Primary  deficit = Fiscal deficit-Interest payments

Note: Monetized  Deficit  = Monetary support RBI

The News

  • The latest state account report for the April-to- September  2021  period,  compiled  by  the  Comptroller and  Auditor  General,  has  waved  a  red  flag  for  Kerala state 
  • CAG clearly hinted at the  need  for  strong  measures  to check  spending  and  increase  tax  and  non-tax  revenue  in the  coming 

Not so rosy numbers!!!

  • According to the latest CAG report, the state  of  kerala  has  a  revenue deficit  of            Rs  30,282  crore  as  on  September  30.
  • The number  is  quite  alarming  when  projected  against  the  revenue deficit  for  the  entire  2020-21  fiscal,  which  was  only  Rs  23,256 crore.
  • The revenue expenditure for Apr-Sep cycle  was  was  Rs  75,417  crore, which  means  the  ratio  of  revenue  deficit  to  revenue  expenditure  is  a staggering  40%.

–             Note:  Even  during  the  worst  financial  years  for  Kerala,  like  during 2001  to  2004,  this  ratio  hadn’t  gone  beyond  28%.

Not so rosy numbers!!!

  • In the first six  months  (Apr-Sep),  the  state  of  Kerala has  borrowed  Rs  37,784  crore.
  • In comparison, the total borrowing for the entire 2020-21  was  Rs  38,190  crore.
  • In fact  this  year’s  budget  estimate  was  for  a  borrowing of  only  Rs  34,231  crore,  which  means  the  state  has already  borrowed  110%  of  the  budget  estimate.

Not so rosy numbers!!!

But Why?

But Why?

Now What..??

  • Some suggest that, two quarters  of  data  wouldn’t  be representative  of  the  figures  for  the  entire  financial 
  • It is agreed that there is a crisis, but there  are  rays  of  hope like  a  steady  increase  in  GST  revenue  and  revenue  from  fuel tax.
  • Through a  robust  recovery  in  the  economy  and  great  rise  in revenue  receipts  Kerala  may  find  ways  out  of  this  in  next  6 months.

Now What..??

  • If the downfall continues, Kerala will  have  to  cut  its  plan size  considerably  and  reduce  allocation  for  all departments  in  the  last  quarter  (Jan-Mar  2022).
  • Union government has recently approved  an  additional borrowing  limit  of  5%  to  Kerala  as  it  is  going  to achieve  the  capital  expenditure  target  for  the  first  two quarters.  Kerala  can  borrow  an  additional  sum  of  Rs 4,000  to  Rs  4,500  crore  for  remainder  fiscal.

What next..??

  • If it’s a bad  news… then

–  The first full budget of Pinarayi Vijayan’s government (Second Term), which is to be presented in February next year, shall  have  to  spell  out stringent      cost-cutting        measures…!!

 

 

 

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