Budget Analysis by Centre for Public Policy Research

Kerala, with its latest budget, has moved away from the tradition of being a budget that focuses on social sector to one that gives major thrust to infrastructure development, said M P Joseph.
He added that this budget is also an attempt to reverse the trend of Kerala’s dependence on its neighbouring states for its food requirements. Joseph was speaking at a seminar on Kerala Budget 2017-18 held in XavMr MP Josephier Institute of Management & Entrepreneurship (XIME) organised by Centre for Public Policy Research (CPPR).
Dr D Dhanuraj (Chairman, CPPR), presenting a background of the Kerala budget, opined how the government should play the part of a facilitator and attempt to experiment with innovative policies to revive the state’s deteriorating economy. Though he welcomed the move to use foreign remittances that amount to Rs 1 lakh crore to fund infrastructure projects, he held his reservations on the feasibility of the scheme.
Dr Lekshmi R Nair (Centre Manager, CPPR–Centre for Comparative Studies), who looked into the allocations for agriculture, said that farmers are suffering from high cost of farming inputs, high wages and declining prices for their produce.
‘Despite a rise in government spending on agriculture from Rs 595.6 crore in 2009–10 to Rs 2106 crore in 2017–18, the net sown area has declined from 2206.1 (thousand hectare) to 1973 (thousand hectare) in the period. Gross cropped area also declined from 3021.67 (thousand hectare) to 2627.5 (thousand hectare) in the same period,’ she stated.
In 2014, the index of farmer outlay was 11477.67 against the index of farmer income that was 8272.5. While the index of farmer outlay increased significantly to 12826.5 in 2015, the index of farmer income diminished to 7706.08 in the same year. Dr Nair argued that unless the basic issues such as inefficient irrigation system, decline in investment credit and severe shortage of agricultural labour are not resolved higher budget allocation would not benefit the sector.
‘With the revenue expenditure of the Government crossing Rs 1 lakh crore for the first time, Kerala is passing through a phase of fiscal distress,’ said Deepthi Mary Mathew (Research Associate, CPPR–Centre for Comparative Studies), while analysing the public finance of the state. Capital expenditure is compromised to meet the increased revenue expenditure.
When Kerala Infrastructure Investment Fund Board (KIIFB) came into existence in 1999, an amount of Rs 1000 crore was mobilized by the government. It is not clear how this fund was utilized. Later, KIIFB was in limbo due to high interest rate of 13 per cent applicable on bonds though KIIFB. Now, the FM has revived it again.
KIIFB will float two types of bonds, general obligation bonds and revenue bonds. The repayment of general obligation bonds will be linked to the taxes, whereas, revenue bonds will be repaid through the revenue from infrastructure projects. Since the onus is on the government, this leads to the ques
tion of the repayment capacity of the government.
Reviewing the budgetary allocation for the social sector, Vinny Davis (Managing Associate, CPPR–Centre for Strategic Studies) said that the allocation for health and education has been hiked in tune with the Ardram and Comprehensive Education Rejuvenation Programme. The budgeted estimate for education is Rs 19978.25 crore, while that of health is Rs 6834.91 crore. The budget allocation constitutes 51 per cent (education) and 21 per cent (health) of the total expenditure on development services.

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