Thiruvananthapuram: Even as the Kerala government borrows heavily to stay financially afloat, much of the money is being spent on administrative expenses rather than development projects, a recent study by the Centre for Development Studies (CDS) has found.

The study, commissioned by the Finance Commission, analyses the state's revenue and expenditure data from 2012–13 to 2022–23 and includes projections up to 2031. It points out that a significant share of borrowed funds has been diverted towards administrative costs instead of developmental initiatives.

As of March 31, 2023, Kerala had uncollected tax arrears exceeding ₹27,902 crore, of which more than ₹13,500 crore was from Goods and Services Tax (GST) alone. The report notes that the state's revenue growth has consistently lagged behind the growth of its Gross State Domestic Product (GSDP).

The state continues to face a revenue deficit, with a large portion of its expenditure absorbed by salaries, interest payments and pensions, undermining overall financial efficiency. Major public sector institutions, including the Kerala State Road Transport Corporation (KSRTC) and the Kerala Water Authority, continue to operate at a loss, further straining the state's finances.

As part of a nationwide exercise to assess the fiscal health of states, the Finance Commission commissioned studies of government institutions across the country, with the CDS study focusing specifically on Kerala.

Key recommendations
The study recommends an immediate reduction in administrative expenditure and periodic revision of the fair value of land to boost the state's own tax revenue.

It calls for privatisation of loss-making public sector undertakings or the closure of entities that remain consistently unprofitable.

The report also suggests leveraging modern technology to effectively curb tax evasion and increasing taxes on alcohol and user charges for public services, with higher rates for premium liquor brands to tap tourist spending.

Other recommendations include enhancing taxation on natural resource–based industries such as granite and sand mining, raising fees for public services including university education, hospital registration and museum entry, allocating more funds for development projects, and rationalising welfare schemes by merging programmes with similar objectives to reduce expenditure.