Finance Minister T.M. Thomas Isaac will have to proffer policy prescriptions to overcome the challenges thrown by the economic slowdown and the drastic cut in allocations from the divisible pool of Central taxes for sustaining the welfare initiatives of the State when he presents the State Budget for 2020-21 in the Assembly on Friday.
Dr. Isaac exudes confidence of wading through the crisis and his ebullience largely rests on the 7.5% Gross State Domestic Product growth against the national average of 7.3% in 2018-19. He promises to insulate the State’s economy from the crippling effects of the economic slowdown gripping the country.
Political commitment
Given the political commitment of the Left Democratic Front (LDF) in conserving its base comprising weaker sections, the State government will have to strain hard to carry forward the welfare pensions being distributed to about 42 lakh beneficiaries. However, resource mopping for continuing the pension outgo would be a daunting task.
With local body polls round the corner, the government could not afford to make any compromises in clearing the bills of local self-government institutions on time. This is in addition to the routine committed expenditure on salary and service pension.
Raising the tax collection to 20% and recovering the revenue lost through tax evasion may be the first feasible option. The Central government decision to defer the filing of Goods and Services Taxes annual returns and non-payment of Central compensation have derailed the State’s plans to overcome the crisis. Besides, the State’s tax collection has been lingering at about 14%.
The government will have to complete the scrutiny of returns within the next two months and complete procedures for recovering the unpaid tax from traders. The budget is likely to contain a slew of revenue mopping measures in this regard.
The State’s plea for raising the annual borrowing limit continues to remain as a cry in the wilderness. The 15th Union Finance Commission’s approach in tax devolution does not seem to offer any relief to the State.
Centre’s approach
The Budget should have solutions to cushion the impact of the Central government’s alleged hostile approach, which is being construed as the price that the State has to pay for its strong stance on the Citizenship (Amendment) Act (CAA) and allied issues.
A change in the Centre’s attitude seems to be impossible and the only option is to evolve indigenous solutions for the State’s problems. And the Budget is likely to have such solutions too.
