Kerala faces record fiscal deficit in wake of COVID outbreak

Kerala faces record fiscal deficit in wake of COVID outbreak

Kerala is facing a record fiscal deficit following the economic crisis triggered by the COVID pandemic.

During the evaluation made for the first quarter of the current financial year, it was found that the state's fiscal deficit stood at 112.9 per cent which comes to the tune of 10,578 crores. The fiscal deficit is the difference between the total income of the government and its total expenditure. Usually, this is below 20 per cent.

A joint fiscal evaluation carried out by state's finance secretary R K Singh and Prof L Anilkumar of Gulati Institute warned that if financial assistance from the central government including GST compensation is not received immediately, the state could plunge into a deep financial crisis in the coming days.

The state's own tax collection received a major setback due to COVID pandemic registering a drop of 79 per cent. While last year from April to July, the state had collected Rs 2803 crore, this year the figure has gone down drastically to Rs 581 crore.

The suspension of lottery sales due to COVID lockdown is one of the major reasons for the drop in revenues.

While the revenue income dropped by 15.6 per cent, there was a significant increase in the non-tax revenue which helped the government manage the situation.

The non-tax revenue increased due to the grant given by the central government to decrease fiscal deficit based on the recommendation of the 15th Finance Commission.

The revenue deficit stands at 138.9 per cent which is 9,877 crore rupees. This is Rs 6,383 crore more than the last year. The borrowings by the government following the financial crisis is also the main reason for this increase. There is a 52 per cent increase in the liabilities of the Government.

During the first quarter of last year, the GSAT income was 7342 crores which have come down to 4,779 crores during the same period this year.

However, when the other states decreased the spending on day to day expenditure and schemes, Kerala thought the opposite way. 

The revenue expenditure increased to 16 per cent because of providing financial assistance to the people under various programmes. The principal expenditure also increased to 21 per cent besides there is an increase of 36.3 per cent in the subsidies granted to the people.

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