The Kerala economy will resort to off-budget spending to tackle the crisis resulting from the economic slowdown and shrinking remittances.
The Pinarayi Vijayan government in Kerala has readied an ambitious Rs 50,000 crore plan to tackle the economic slowdown gripping the economy, state finance minister Thomas Isaac said. The programme will create a world-class infrastructure to attract investment into the state, he said. Projects worth Rs 10,000 crore have been tendered and implemented already, while those worth another Rs 20,000 crore will be executed this year.
“We have launched an off-budget spending programme by creating special purpose vehicles that are investing in infrastructure. The total expenditure on this programme will be Rs 50,000 crore,” Isaac told Financial Express Online in an exclusive interaction.
Isaac had flagged the possibility of the state economy slipping into a regional recession in the state Budget for 2016-17. He had suggested massive infrastructure building as a solution to the impending economic crisis.
Kerala has recently signed an agreement with the Union ministry of road transport and highways for the widening of the 526 km NH 66 stretch in the state into 6 lanes. The state government has agreed to bear a fourth of the cost to acquire land for the project. Kerala has 1,45,704 kilometres of roads, including 1524 kilometres national highways and 4,341.6 kilometres state highway.
The state government’s finances are very severely constrained. The revenues are growing at about 10%, while the expenditure is rising by 15-16 per cent. The state cannot cut expenditure on social commitments like health and education, the minister said.
The state’s economy is also facing a major threat from the return of thousands of migrants from the Gulf countries that are under the grip of an economic crisis. If the global economy slips into a recession like the one in 2009, there will be a huge economic crisis in the Gulf region. Apart from the blow of falling remittances, the state government will have to spend a huge amount to rehabilitate people returning permanently from foreign countries.
According to a study by the Centre for Development Studies (CDS), Thiruvananthapuram remittances fell to Rs.63,289 crore in 2016 compared with Rs. 71,142 crore in 2014. Though the remittances rose to Rs 90,000 crore in 2017, the increase is attributed to the return of a large number of Keralites from the Gulf region who brought back their savings with them.