Finance Minister Thomas Isaac has said that the financial crisis faced by Kerala would ease with the start of New Year.
The reason for the hope that the severe financial crunch affecting the state exchequer would end by the second week of January and that things would return to normal, is the fact that the restrictions imposed on borrowings by the Centre have been relaxed. To use Finance Minister’s own language, Kerala has been going through an extraordinary situation for the last three months – put plainly, a terrifying situation capable of generating unrest in the land. Since the Centre denied the permission to borrow, the situation is such that no income other than tax and additional sources of funds,could be relied upon. However, with the permission to borrow Rs 6, 000 crore, the state has got a temporary reprieve from the crisis. He also gives an assurance that all the Bills which have been withheld would be passed once the pay days are over.
Kerala is a state where there is a not-so-easily bridgeable gap between income and expenditure. If the income is 10 per cent, the expenditure comes up to 16-17 per cent. The treasury gets empty once the salaries, pension and other allowances are paid. Borrowing is the only way to bridge the gap and for development. When the Oommen Chandy government assumed power, the public debt was more than Rs 78, 000 crore. Five years later when the Pinarayi Vijayan government took over, the liabilities exceeded Rs 1.5 lac crore: the rate of increase was almost double. The state had aimed to borrow a public debt of Rs 20, 300 crore this fiscal year. Out of this, Rs 14,000 was already availed before Onam. What the Finance Minister admits as the frightening situation capable of creating unrest is the Rs 6, 000 crore that has been withheld. Another implication of this is that the economic scene in Kerala is in a state of deep depression. A Facebook post he shared the other day ends like this: Borrowing through the treasury like before, in order to bridge the gap between the income and expenditure is not possible now. The expenditure should be in control according to the income. A rigid financial discipline is a must. This stringency will be reflected in the imminent budget as well.
Can Kerala, a consumer state and depending on foreign exchange excessively, fill the gap of over six percent, or bring it down through economic restraints? Given the current financial stress of the government, can we ensure that the loan amounts will be utilised only for development projects that boost revenue? Past experience gives an answer in the negative. When even Left economists had warned that GST would result in huge repercussions at the national level, the finance minister stood by GST with an eye on the prospect of additional revnue it would bring to Kerala as a consumer state. But in reality, belying all hopes, GST income from both within and outside the state dwindled. Already, the economic recession brought in by demonetization had adversely affected sales tax revenue. With the addition of GST, the country and the state has fallen into a complex financial trap. Further, the socio-economic transformations in the Gulf region have started affecting Kerala. The inward remittance of foreign exchange has suffered a fall in the current financial year. The stagnation in the market and the fall in foreign exchange revenue will have a negative impact on Kerala not only financially, but socially as well.
No New Year day should begin on a note of frustration. The stock taking of past days should be a guide for charting the course for future. The New Year resolution of every Keralite has to be the augmentation of Kerala's inherent income. The geography of Kerala, with its hills, rivers, land and backwaters is rich with adequate resources for the three and a half crores of people to win a sumptuous bread. Technology the world over is perfecting itself to enhance income without damaging nature. And our youth has the capacity to employ such technology. What the times call for from our political leadership and media community, is the willingness to correct mistakes, and to transmit a creative energy for breaking new paths. Let the youth lead, and let 2018 be a year of Kerala regaining its youth. Madhyamam wishes all its reader a happy new year.