Hit by revenue constraints and borrowing curbs by the Centre, the Kerala government on Friday sought a modest 5% hike in the Budget for FY24 and imposed a social security cess on the sale of petrol, diesel and liquor to bring down fiscal deficit to 3.5% of GSDP from 3.61% in FY23.
However, the revenue deficit of the state is set to rise to 2.1% of GSDP in FY24 from an estimated 1.96% in FY23, reflecting pressures on its finances.
Kerala’s gross state domestic product (GSDP) grew 12% in 2021-22, much higher than the national average.
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Committed expenditure on salaries, pensions and interest eats up close to 60% of the state’s annual Budget, leaving little legroom for the state to expand capital expenditure. Kerala’s debt was 39.1% of GSDP in FY23, one of the highest in the country.
“Even if the efficiency in the utilisation of the outlay estimated as government expenditure in the Budget is increased by just 5%, the benefit will be manifold,” Kerala finance minister KN Balagopal said.
To mobilise additional resources, Balagopal announced a Rs 2/litre social security cess on the sale of petrol and diesel, a move widely criticised by his party’s political opponents.
Balagopal said the fiscal constraints in FY24 would 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,” he said.
An amount of Rs 2,000 crore is earmarked for 2023-2024 to continue vigorous market interventions, considering that the threat of inflation has not completely abated.
As part of supporting rubber farmers, budget allocation for rubber subsidy is enhanced to Rs 600 crore.
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The procedures for launching projects like industrial parks, agri parks, work-near-home, etc are in progress. Industrial parks utilising private capital will start functioning soon. More projects are underway in IT fields. Activities are also underway to locate new parks. The construction of an IT park at Kannur can be started this year itself, the minister said.