‘Focus on Infra Development Marks a Shift in State’s Budgetary Tradition’


Kochi: The latest Kerala budget has moved away from the tradition of   focussing on social sector and has instead given a major thrust to infrastructure development, said M P Joseph IAS (Retired).

Joseph was speaking at a seminar on Kerala Budget 2017-18 held at Xavier Institute of Management & Entrepreneurship (XIME) here, organised by Centre for Public Policy Research (CPPR) the other day. He said this budget is also an attempt to reverse the trend of Kerala’s dependence on its neighbouring states for its food requirements.

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 amounting to Rs. 1 lakh crore to fund infrastructure projects, he expressed apprehensions about the feasibility of the scheme.

Dr. Lekshmi R Nair, Centre Manager, CPPR–Centre for Comparative Studies, who analysed 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 substantially,” she stated.

In 2014, the index of farmer outlay was 11,477.67 against the index of farmer income that was 8272.5. While the index of farmer outlay increased significantly to 12,826.5 in 2015, the index of farmer income diminished to 7706.08 in the same year, she said. 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 budgetary 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, she said.

When Kerala Infrastructure Investment Fund Board (KIIFB) came into existence in 1999, an amount of Rs. 1000 crore was mobilised by the government. It is not clear how this fund was utilised. 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, she said.

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 using the revenue from infrastructure projects. Since the onus is on the government, this leads to the question of the repayment capacity of the government, she said.

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.