The State government has been advised to prepare well and present its case strongly before the soon-to-be constituted 16th Finance Commission to recover Kerala’s lost fiscal space. The advice came from speakers at a seminar on the Kerala Economy organised in connection with the Keraleeyam 2023 celebrations on Friday. It has come at a time when the State government has been blaming adverse central policies for the State’s troubles on the financial front.
Reduced share in tax pool
Former Union Cabinet Secretary K.M. Chandrasekhar observed that the State should form a team and do its homework well to convince the 16th Finance Commission, in matters including the State’s reduced share of 1.92% in the divisible tax pool and the revenue deficit grant. Speakers urged the State to articulate its concerns and suggestions regarding the parameters for deciding the tax-sharing formula with the commission. Other States too should be brought on board to present common concerns before the commission, they said.
Commenting on the shrinking federal space and the fiscal crisis in Kerala, former Finance Minister T.M. Thomas Isaac said the State was facing a Union government-generated fiscal crisis, and the answer lay not in finance, but in politics.
The aggregate reduction in the State’s gross borrowing limit since 2017 is to the tune of ₹1,07,500 crore, Principal Secretary (Finance) Rabindra Kumar Agarwal said. “Gross borrowing limit has been reduced significantly since 2017 with an aggregate reduction of ₹1,07,500 crore to date because the Government of India is reducing net accrual of public account and off-budget borrowing from the gross,” according to his presentation.
Lekha S. Chakraborty, National Institute of Public Finance and Policy, urged the State government to devise strategies for directly supporting the care economy infrastructure, given the emerging demographic transition and the dependent population.
Given Kerala’s longstanding history and success of people-centric model of development, it is uniquely positioned to build a knowledge economy that is more cosmopolitan, pluralistic, democratic and deeply rooted in the very creative local culture, Patrick Heller, Professor of Sociology and International and Public Affairs Watson Institute for International and Public Affairs, Brown University, said attending the event online.
Advantage in two areas
Kerala has a huge comparative advantage in education and health, two areas that are going to define the 21st century global economy, Prof. Heller said. At the same time, the State also needs to overcome the issue of low participation of women in the labour force. “This is a huge, untapped, reserve army of extremely innovative potential that needs to be mobilised,” he said.
Robin Jeffrey, Emeritus Professor, Australian National University, who attended online, commented on the need for developing a sound economic base for ensuring the sustainability of the ‘Kerala Model’ of development.
Finance Minister K.N. Balagopal chaired the session. Economist M.A. Oommen spoke on the challenges related to the environment and fiscal sustainability facing the State. State Statistical Commission chairman P.C. Mohanan; Vinoj Abraham, Associate Professor at Centre for Development Studies; Planning Board member R. Ramakumar; and Principal Secretary (Finance) Rabindra Kumar Agarwal spoke.
