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G.K. Nair

Kochi , Sept. 23

IN contrast to the growth rates of capital expenditure in other States, it continues to remain negative in Kerala. The average growth rate in capital expenditure came down steeply from 16 per cent in the first half of the nineties to 4.3 per cent in the second half.

During the last three years the growth rates were negative, according to a study by Dr K.K. George and Dr K.K. Krishnakumar of Centre for Socio-Economic and Environmental studies here.

The growing fiscal crisis of the state during the second half of the nineties was more due to failure of the State to mobilise both tax and non-tax revenues. But, the expenditure management of the State cannot be absolved of the responsibilities for the fiscal distress of the State, they said. The growth rate in revenue expenditure was as high as 21.4 per cent in 1997-98 and 25.3 per cent in 1999-2000.

The average growth rate in total expenditure both revenue and capital put together declined from 15.5 per cent to 14 per cent between the first and the second halves of the nineties, they said. But as in the case of revenue expenditure the low growth rate in the second half of the nineties was on account of the steep decline in growth rate in 2000-01, from 21.6 per cent in 1999-00 to 1.9 per cent.

The development expenditure shows a deceleration in the growth rate in Kerala. In fact, it was negative in 2000-01. Whereas in the case of other states, it shows improvement albeit marginal, they pointed out. The biggest increase was recorded in the case of non-developmental expenditure during both the periods. This high growth rate in non-development expenditure is partly on account of the high growth rates in debt servicing from 18.7 per cent to 19.9 per cent, and pensions.

The average growth rates in non-plan expenditure during both the periods were the same, they said. The growth in plan expenditure came down drastically between the two periods from 17.3 per cent to 11.7 per cent. The average growth rate in plan outlay came from 21.8 per cent to 16.7 per cent, they said.

Debt servicing accounted for one-fifth of the total expenditure of the State in 2000-01. Besides, it is showing an almost steady growth trend from 1995-96 onwards. Debt servicing accounted for 69 per cent of the Gross Fiscal Deficit (GFD) in 2000-01. From 1991-92 to 1993-94 debt servicing exceeded or equalled the GFD. "These figures imply that the whole borrowing was less than adequate to service the past debt", they said.

The percentage of interest payments in total revenue expenditure also shows an increase. The ratio rose from 12.1 per cent in 1990-91 to reach 19 per cent in 2000-01. Similar trends are visible in the case of all states too. But this ratio for Kerala was more than that of all states during every year of the nineties. Gross interest payments accounted for 58 per cent of GFD in 2000-01. The high and growing debt service obligations is on account of two factors. The first is the increase in volume of borrowings to finance the growing GFD.

The salaries plus pensions as a percentage of revenue expenditure were coming down from 71.4 per cent in 1990-91 to 47.8 per cent in 1998-99. But it went up during the next two years largely due to the revision in salaries and pensions as a result of implementing the recommendations of the Fifth Pay Commission.

Salaries plus pensions accounted for half of the total expenditure in 2000-01. It was more than half of the revenue expenditure. Salaries, pensions and interest payments representing three contractual obligations of the State accounted for 71 per cent of the revenue expenditure.

The high share of salary and pension components in the State Government's expenditure is partly due to the high share of relatively more labour intensive social services, in the revenue expenditure of the State Government. The share of these services, however, is coming down, they said.

In fact, the share of pensions is steadily increasing in the revenue expenditure of the Government. From 11.9 per cent in 1990-91, the share of pensions increased to 12.3 per cent 1995-96 and to 16.2 per cent in 2000-01. The share of pensions in Kerala is almost double that of all other states.

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