Kerala’s revised budget lays emphasis on healthcare, elevated public spending

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June 05, 2021 2:00 AM

The budget has several initiatives for the health sector like setting up isolation wards for contagious diseases in all government hospitals and health centres, enhancing bed strength of pediatric ICUs and setting up a liquid medical oxygen plant of 150 metric tonne capacity.

“Covid-19 inflicted adverse shock in the economy and severe stress on state finances during 2020-21. Kerala economy suffered a GSDP loss of Rs 15,6041 crore in 2020-21 in relation to BE 2020-21,”the finance minister said.

‘Health above all’ is the strategy for development in the revised Kerala budget presented by the new finance minister KN Balagopal on Friday, in which no new tax proposals were announced in the context of the pandemic.

“Overcoming the pandemic has become the pre-requisite for development. If Kerala becomes the first state to conquer Covid, we will get more opportunities for economic progress,” Balagopal said in his maiden budget speech in the state assembly.

Former finance minister TM Thomas Isaac had presented a full budget in February 2021, and the revised budget by the new LDF government, was presented in the context of the second wave of the pandemic .

Balagopal said that higher public spending is essential to spur demand and revive the growth of the economy.

Revenue expenditure for 2021-22 is estimated to grow at 26% from 2020-21 revised estimate to Rs 1,47,891 crore , while capital expenditure is projected to grow at 27.85% on year to Rs 14,141 crore.

The new proposals in the revised budget includes a second Covid-19 stimulus package worth Rs 20,000 crore (a similar one was announced last year), allocation of Rs 1,000 crore for free distribution of vaccines for all above 18 years and Rs 1,500 crore for first-phase conservation of the coastal area.

The budget has several initiatives for the health sector like setting up isolation wards for contagious diseases in all government hospitals and health centres, enhancing bed strength of pediatric ICUs and setting up a liquid medical oxygen plant of 150 metric tonne capacity.

The minister also managed to stick to the path of fiscal consolidation despite the fiscal constraints induced by the pandemic. The states’ own tax revenue is estimated to grow at 6.5% in 2021-22 over the budge estimate for 2020-21. Though the state is projected to get only Rs 12,812 crore as central tax transfers from the divisible pool in the current fiscal, a good Rs 3,748 crore less than estimated in the budget presented by Isaac in February, a higher-than-expected revenue deficit grant from the Centre (Rs 19,891 crore in 2021-22) has come in aid.

Revenue deficit is projected at 1.93% of GSDP in 2021-22 as against 2.94% in 2020-21. Fiscal deficit is projected at 3.5% of GSDP in this fiscal as against 4.25% in FY21. Fiscal deficit, according to the medium term plan, is seen at 3% of GSDP, the level prescribed under FRBM rules in 2022-23 itself, while elimination of revenue deficit, another prescription, seems to be a distant goal for the perennially revenue -deficit state.

“Covid-19 inflicted adverse shock in the economy and severe stress on state finances during 2020-21. Kerala economy suffered a GSDP loss of Rs 15,6041 crore in 2020-21 in relation to BE 2020-21,”the finance minister said.

The medium term fiscal policy presented in the assembly reports that the lockdown impacted the state finances adversely in 2020-21. The revenue shortfall in respect of states own tax revenue and states own non-tax revenue were Rs 22,148 crore and Rs 5,466 crore respectively in relation to the respective budget estimates.

He also pointed out that austerity measures will also become inevitable in the future. “Government will formulate the most comprehensive plan for revenue enhancement and expenditure reduction. But a time of crisis is not the right time for expenditure reduction and higher taxes ,” he added.

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