ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Kerala’s Unprecedented Fiscal Crisis and the State Budget of 2023−24

Kerala has been experiencing a persistent, acute and unprecedented fiscal crisis. The persistent failure of successive budgets to address the causes of the fiscal crisis mentioned in the white paper on state finances of 2016 on two fronts, namely expenditure control and resource mobilisation, are major reasons for the crisis. The huge increase in revenue expenditure due to the revision of salary and pension once in five years is another major reason. The other factors that contributed to the crisis are the fall in the share of central taxes due to the Fifteenth Finance Commission, the stoppage of goods and services tax compensation, the lack of clear norms about the items coming under borrowing within the budget and outside the budget and the lack of clarity on inclusion of items in the public account.

The author is grateful to the anonymous reviewer for valuable comments.

Kerala Finance Minister K N Bala­gopal said in the state legislative assembly that the state is reeling under an unprecedented fiscal crisis and attributed it to the distorted fiscal policies of the central government, the outbreaks of the COVID-19 pandemic, and the recurring natural disasters (Niyama Sabha Question 2022). The crisis has led to an acute shortage of funds for all items of expenditure, except salary, pension, and certain essential administrative expenses. In the budget 2023−24, it is mentioned that the government is anticipating a more severe fiscal crisis in the coming fiscal year 2023−24 compared to the previous year. The reasons attributed to the crisis in the budget are the fall in revenue deficit grant, stoppage of goods and services tax (GST) compen­sation, restric­tions in borro­wing and treating certain items of off-budget borrow­ing as borro­wing within the budget. In this context, the article examines the nature and magnitude of the fiscal crisis of Kerala, the causes of the crisis attributed in the state budget, and the factors contributing to the crisis.

Nature and Magnitude of the Fiscal Crisis

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Updated On : 5th Dec, 2023
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