Overview of Kerala's Fiscal Health
A white paper on Kerala's fiscal health highlights urgent measures needed to address resource scarcity and suggests increasing private and co-operative sector investments, along with central public sector involvement. The Kerala Infrastructure Investment Fund Board (KIIFB) requires immediate government attention for future planning.
Context and Background
- The white paper was presented by Chief Minister V D Satheesan, holding the finance portfolio.
- The report comes shortly after Tamil Nadu's announcement of a similar fiscal assessment.
- Both states are anticipated to face challenges related to an ageing population by 2026, as per the Reserve Bank of India.
Key Issues and Recommendations
- Ageing Population:
- High old-age dependency ratios and increased social sector expenditures.
- Proposal to raise the retirement age from 56 to 60 years to align with the central government, potentially saving Rs 6,000 crore.
- Fiscal Stress:
- Committed expenditure at 77% of revenue receipts, compared to the national average of 46%.
- Interest payments are 20.9% of revenue receipts, nearly double the national average.
- Salaries and pensions are higher, with salaries at 30.1% of revenue receipts.
- Outstanding Liabilities: Rs 5.07 lakh crore with a low capital expenditure of 1.3% of Gross State Domestic Product.
- Revenue Challenges: The end of GST compensation and stricter fiscal deficit targets exacerbate fiscal pressures.
- Inherited Liabilities: Totaling around Rs 48,733 crore, including dearness allowance and deferred payments.
- KIIFB Management:
- Recommendation to bring KIIFB under Finance Department's budgetary control and subject it to a Comptroller and Auditor General audit.
- Immediate decision needed on KIIFB's future, considering the legal status of bonds and fund security.
