Kerala Budget: Dr. Isaac’s Tight Rope Walk

G Vijaya Raghavan

Dr. Thomas Isaac has set an ambitious goal in the first budget of the Pinarayi Vijayan government: mobilize as much as one trillion rupees outside the state budget over five years and invest that money in Kerala. Isaac is betting that boosting capital investment would help tide over the state’s financial crisis and spur economic growth. But at the same, he also has to plug a massive revenue shortfall amid several challenges; tax collection has slumped and the
Middle East crisis triggered by the crash of crude oil price is still boiling over. No wonder, in his budget speech the finance minister has said he is going to have a tight-rope walk managing Kerala’s fiscal situation.

For the current financial year, Isaac has announced a fiscal stimulus package of 200 billion rupees, which will be spent on infrastructure such as highways, bridges and buildings as well land acquisition. The proposed fund mobilization and investment will be run by a Funds Trustee Advisory Commission. The move is commendable, but the government’s biggest challenge in successfully implementing this plan will be ensuring the fund is professionally managed. Isaac must see to it that the people coming on board of the Commission are qualified and committed, and their selection won’t be on the basis of political considerations. SBI Caps had earlier done a study on such a model for the Kerala State Planning Board, which, I hope, would be used for initial ground work on this.

It’s also heartening to see that Dr. Isaac hasn’t taken a confrontationist approach. He has continued with many of the good plans the previous government had initiated. The budget is awash with steps to further improve housing, healthcare, social security, education and agriculture. I also appreciate the measures he has proposed for the weaker sections of the society, especially the fisher folk and scheduled tribes. The target to provide housing for all in five years and various support schemes announced for differently abled people are indeed the right steps. The move to club various health insurance schemes is also a good one, but Dr. Isaac should ensure the advantages of the Karunya scheme are not lost in this merger.


Cleaning up the fiscal mess

There are a series of proposals as well as planned additional spending to boost agriculture as well, though a scheme to encourage farming of organic/safe-to-eat vegetables would have gone a long way in helping that sector. One concern I have is about the move to spend one billion rupees through state-run institutions for the cashew industry. This sector is riddled with corruption, and I fear the money would go down the drain as we have seen in the past.

Dr. Isaac’s statements on education are positive. He has set aside 10 billion rupees from the proposed stimulus package for raising the standard of one school in each constituency to international level. However, the budget is lacking on clarity when it comes to higher education, where the quality has plummeted over the years. The involvement of private sector is essential to improve the quality of higher education in our state, and I wish the budget had touched upon this matter. Similar is the case with information technology parks: we need to come up with plans to encourage private investments in this area, as it is not practical for the government alone to spend money on IT parks.

One smart move in this budget is about the proposal to use information technology to help boost tax collection and ensure compliance. The decision to develop a mobile phone app for people to submit the copies of their bills to participate in a lottery would go a long way in encouraging consumers to demand bills at the time of shopping. Nevertheless, it looks like the government has conveniently forgotten about the massive tax evasions happening in gold trade in the state. The state loses substantial tax from gold and often such money ends up being used for anti-national activities. There are no moves in the budget to plug this leak, and I hope the minister would announce some stern measures during the vote on account. After all, he has decided to walk on a tight rope.