The Hindu Business Line : CAG report points to growing fiscal deficit in Kerala

THE Comptroller and Auditor General of India (CAG) has pointed to the large revenue and fiscal deficits in Kerala year after year, indicating continued macro imbalances in the State.

The report of CAG for 2002-03, tabled in the State Assembly, says the revenue deficit increased by 58 per cent during the year. As a result of this, the Government could not adhere to the projections made in the Medium Term Fiscal Reforms Programme and was consequently rendered ineligible to receive its share of Rs 44.30 crore from the Incentive Fund set up by the Centre on the recommendation of the Eleventh Finance Commission.

The report notes that during 2002-03, the revenue receipts grew by 17.42 per cent compared to 3.72 per cent in the previous year. This was due to 23.28 per cent and 24.86 per cent rise, respectively, in tax and non-tax revenue.

Sales tax was the major source of the State's own tax revenue, having contributed 73 per cent of the total revenue, followed by State excise ( 9 per cent), vehicle tax (7 per cent) and stamps and registration (7 per cent).

Non-tax revenue in nominal terms increased marginally from Rs 659 crore in 2000-01 to Rs 678 crore in 2002-03.

On the other hand, central tax transfers declined from 19.20 per cent in 1998-99 to 16.13 per cent in 2002-03. The grants-in-aid from the Centre also came down from a peak of 10.77 per cent 2001-02 to 8.82 per cent in 2002-03.

The total expenditure of the State rose from Rs 10,277 crore in 1998-99 to Rs 15,705 crore in 2002-03 at an average trend rate of 9.11 per cent per annum. The revenue expenditure, which had the predominant share in total expenditure, increased from Rs 9,228 crore in 1998-99 to Rs 14,756 crore in 2002-03 at an average trend rate of 10.96 per cent per annum and with a growth of 26.53 per cent in 2002-03.

The proportion of development expenditure to total expenditure declined from 63.15 per cent in 1998-99 to 56.15 per cent in 2002-03. More importantly, the committed expenditure on salaries, interest payments and pensions alone consumed about 90 per cent of the revenue receipts, thereby crowding out the socio-economic developmental expenditure.

The report observes that the persistently high ratio of revenue deficit to fiscal deficit indicated that 67 per cent to 83 per cent of the net incremental borrowings were used for current consumption. This led to the Government incurring more liabilities to maintain the socio-economic developmental activities in the State.

The fiscal liabilities of the Government increased from Rs 17,367 crore in 1998-99 to Rs 33,782 crore in 2002-03 at an average trend growth rate of 18.53 per cent. Consequently, interest payments doubled from Rs 1,446 crore to Rs 2,947 crore during the period.