Kerala Finance Minister TM Thomas Isaac presented the 2018-19 State Budget today, envisaging a deficit of ?760.98 crore, after committing ?915.15 crore in additional spending and mobilising ?970.40 crore in resources.

He announced a series of belt-tightening measures to hold the economy aloft after being devastated by both ’natural’ and ’man-made’ disasters last year - very severe cyclone ’Ockhi’ and the demonetisation-GST combine.

’Ockhi’ package

The first has set him back by ?2,000 crore by way of a comprehensive package designed to save lives and secure livelihoods of fishermen and their families, while the latter shattered his hopes of raising revenues along projected lines. Severely constrained for funds, the Minister chose to take ample recourse to workhorse Kerala Infrastructure Investment Fund Board (KIIFB), an off-budget mechanism that securitises future revenue streams of the projects it finances.

At the same time, he stuck to the lofty principles of welfare economics, except re-working the eligibility criteria, to ensure that precious available doles reach only the needy.

Disillusioned with GST

The GST has been a big let-down, Isaac said. He had earlier gone on record that the consumerist State would be a big gainer since GST would boost revenues by 20- to 25 per cent.

But what materialised is just around 14 per cent, which was not too high from the VAT regime that the GST replaced. Faulty implementation, closed checkposts, and ban on e-declarations have only compounded the matter.

The widening gulf between revenue and expenditure has been an enduring feature about the finances over the last five years, limiting severely the access to resources for financing the annual Plan.

Centre’s objection

For the first time ever, the Centre took objection to the abnormal rise in the balances in the State’s public account of ?10,288 crore. It had even threatened to curb to that extent the limit of funds that te State could raise from the open market. Learning from the bad experience, the Minister said he is committed to strictly observe the three per cent target set for fiscal deficit progressively. He estimated that the fiscal deficit for 2018-19 would be 3.1 per cent. The Minister has also resolved to reduce the revenue expenditure by 20 to 30 basis points every year for the next five to six years to wipe it out entirely by the end of the period.

KIIFB rating

KIIFB project proposals worth ?54,000 crore had been flagged in the last three budgets. Proposals worth ?20,000 crore have been provided funds and are now in the execution stage. KIIFB has been accorded A+ rating by agencies Crisil and ICRA.

Isaac also toyed with a number of non-tax revenue avenues to find funds for his pet schemes, including welfare pension. NRI chit funds and ’free float’ available from treasury deposits are also being tapped in this manner.

A minor revision in stamp duty, land tax and fair value; rationalisation of liquor prices; and a rare upward revision in user fees and service charges are also expected to chip in with their own minor contributions in terms of additional resources.