Figures disclosed by Kerala finance minister Thomas Isaac about the state's economic situation are enough to quicken anyone's heart-beat. The chief sources of Kerala's revenue have ceased. The return of Non-Resident Keralites coupled with the economic crisis in the Gulf region will result in a dent of over 25 % in the external income. The finance minister's assessment that it will take the state longer than other states, to return to normalcy given Kerala's economy with weakened internal and external revenue.
Dr Isaac estimates that Kerala, which already was suffering a loss of Rs 80,000 Cr in domestic production, will now face another deficit of Rs 1.5 Lakh Crore. In other words, the growth rate of the state this financial year will fall to 15 per cent in negative territory. He asserts that this serious and alarming situation can be overcome only with extra-ordinary steps and therefore collective deliberations and endeavours involving all quarters are essential.
The fact is that there is no magic wand before the minister as a solution other than borrowing. With the raising of the ceiling on borrowing, to overcome the Covid crisis, from 3 per cent to 5 per cent of GDP, the relief is that Kerala can borrow an additional Rs 18,000 Crore. Although this will help avert a temporary administrative standstill, most financial experts doubt whether this can give a permanent solution to the cash crisis faced by the state. For, even the existing public debt has crossed Rs 2.94 lakh Crore. For the debt servicing of a year alone, the state needs Rs 19,850 Crore. But then the amount taken on loan cannot be utilised entirely for development. Over the last 20 years, loans taken ostensibly for capital expenditure, had to be diverted for day-to-day expenditure. The major part of Kerala's revenue is not generated by production sector, but by taxes from four sectors of petrol, liquor, lottery and motor vehicles.
To put it otherwise, 59 per cent of the revenue that accrues to the treasury comes from sale of liquor, gambling and petrol taxes. And as for the outflow of funds, 62.78 per cent of it is spent on the salary and pension of its 5.5 lakh government employees. Without correcting this unscientific equation in public fund mobilisation and distribution, it is impossible to make Kerala economy balanced.
The white paper released when the Pinarayi government took office had underlined the concern about dwindling revenue and increasing deficit. The finance planning employed over the last four years could not rectify this situation. The financial crisis faced by Kerala cannot be hidden by rhetoric or any jugglery. There is no way out other than a comprehensive overhaul with numbers and objective facts in front. If post-Covid Kerala has to be turned into a self-sufficient and balanced state, there is no wayout other than through in-depth introspection.
As a first step of transformation, the government should be prepared to issue another white paper that delineates the prevailing economic situation. For the re-vamping of the state's economy in a way that mutually complements the financial growth and distribution, it is imperative to forge a collective effort of political leadership and socio-economic experts. Since the Centre is continuing with its economic discrimination even during the Covid period, the government itself will have to take the initiative to forge a united stir cutting across political divides in the coming days. It is unfortunate that the all-party meeting held the other day did not pave the way for a comprehensive rebuilding or political consolidation.
It is time for the government to shed the arrogance that everything can be set right by itself, and for the opposition to give up the mode of criticising everything of the government. For some time, the democratic right to seek facts and enquire of authoritiies about Covid details, has been under lock down. Even in this time of the 'new normal', questions and protests are still relevant in order to convert Kerala's fractured economy and the social scene with already prevailing imbalances, into a fair and just dispensation.