The Kerala government on Thursday asked the Centre to allow it to borrow up to 4.5% of the state gross domestic product (GSDP) in FY19 as against the norm of 3% to garner additional resources for rebuilding the state ravaged by floods.
The state also sought imposition of a cess on certain luxury items to garner resources. The proposal is likely to be considered in the next Goods and Service Tax (GST) Council.
The increase in the borrowing limit could enable Kerala mobilise an additional Rs 10,000 crore or thereabouts, bulk of which could be used for revenue expenditures such as relief, compensation, repair and maintenance. “Kerala is looking at external borrowing of $1 billion (Rs 7,250 crore with $1 at Rs 72.5) from agencies like the Asian Development Bank,” state finance minister Thomas Isaac said after meeting finance minister Arun Jaitley.
He requested the Centre to raise the borrowing limit for Kerala to 4.5% of the GSDP this year and 3.5% in FY20 as against 3% mandated by the Fiscal Responsibility and Budget Management (FRBM) Act. Isaac sought an exemption for the additional borrowing window from the FRBM limit. “The finance ministry is considering an all-India cess for Kerala development,” Isaac said.
Earlier, the Kerala government had sought about a Rs 4,700-crore package from the Centre. Following the meeting with Jaitley, the Centre on Thursday sent an inter-ministerial team, headed by special secretary (in home ministry) B R Sharma, to Kerala to assess the funds required for rebuilding activities. Last month, the Centre had released Rs 600 crore to Kerala.
“Kerala requires at least Rs 6,000 crore for revenue expenditure towards relief, compensation, repair and maintenance,” Isaac recently tweeted.
Kerela is a service-led economy, which grew by 7.4% in FY17. In FY19, state GST is expected to fetch Rs 27,000 crore, the largest component (over 35%) of Kerala’s tax revenue. The outstanding liabilities of the state is over 30% as against a prudential level of 20% as recommended by the N K Singh-led FRBM panel.