The Hindu Business Line : Kerala: Review counsels a restrained hiring policy

A `RESTRAINT on hiring' is one policy measure that the State Government would have to seriously pursue in order that non-developmental expenditure is kept within limits and precious funds get directed to developmental efforts.

Nowhere is a restraint on hiring more needed that under the education sector, especially in schools, says the Economic Review for year 2004 tabled in the State Assembly.

For instance, the fall in the overall population there has led to a steady drop in enrolments in schools. This is not reflected in the recruitment of teachers, which continues to take place irrespective of the strength of the student population. This is because recruitments are carried out at the will and pleasure of the respective school managements and the State Government ends up paying salaries to all.

Efforts to bring a sense of discipline in this matter have not been successful so far. In this connection, the Review also noted that the unique achievements that the State has attained in several sectors are getting undermined for lack of required investments.

These only go to accentuate what have now become familiar as the `second generation' problems in health, education and social sectors where the State is starved of funds to maintain existing infrastructure built assiduously over a period of the last few decades.

The State should take spirited measures to augment tax receipts through better tax administration, improved tax compliance and rationalisation of the tax structure. The Review emphasised the need to subject the ever-increasing tax exemptions and concessions extended to various sectors to thorough review to assess if they have been effective in promoting the desired objectives.

Low-cost recovery from services has been slowing down even a normal inflation-indexed growth in non-tax revenue receipts. Cost recovery and public spending bear no positive correlation. The poor aggregate cost recovery ratio for the State is on account of the higher share of social services.

The Review observed that there is ample scope for increasing non-tax revenue in the State through higher user charges, as the rates for public services as now prevailing were fixed years back.

Loss making public sector units continue to adversely impact both explicitly and implicitly on the State's fiscal position. Returns on investments are abysmally low hurting the State in every Finance Commission awards since the latter follow certain norms with regard to minimum returns.

Faced with the secular deteriorating fiscal position, the State has initiated medium term fiscal reforms. Some of the components of the reform programme are the enactment of the `Kerala Fiscal Responsibility Act, 2003,' closure of TP (treasury public) accounts and redeployment and restructuring initiatives for an efficient civil service.

The Kerala Fiscal Responsibility Act, 2003 mandates the lowering of fiscal deficit to two per cent of the State Domestic Product and balancing the revenue budget by year 2007.

(However, while presenting the State Budget subsequently, the Finance Minister, Mr Vakkom Purushothaman, said this was not feasible given the prevailing fiscal position and proposed to extend this threshold period by two years.)

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