Kerala Finance Minister KN Balagopal on Friday, revising the proposals of predecessor Thomas Isaac during the first Pinarayi Vijayan government, presented a tax-free Budget for 2021-22 even as it was grounded on a ‘firm resolve to fight an ongoing health emergency.’

Balagopal projected a cumulative deficit of ₹1,866.79 crore at the end of the financial year after he announced additional expenditure of ₹1,715.10 crore. Revenue deficit is expected to balloon to ₹16,910.12 crore while capital expenditure may nosedive during the pandemic year by as much as ₹12,546.17 crore.

Unforeseen macro developments

Certain developments that could not have been foreseen while preparing the earlier budget have necessitated the presentation of this budget, he said. The most important of these are the rapid transmission of the second wave of Covid-19 and the apprehensions of the onset of a third wave.

“This health emergency necessitates certain fine tunings in our development strategy. Overcoming the pandemic has become the pre-requisite for development. In essence, the strategy for effective healthcare has become our strategy for development in this Budget,” Balagopal said.

No cut in expenditure

A surprise statement at the rear of the budget was Balagopal’s resolve not to cut down on expenditure through the rest of the difficult year. “During economic slowdown and natural disasters, the government could have stepped aside by reducing the expenditure. But, not this government,” he declared emphatically.

Better still, Balagopal appeared ready to bell the proverbial cat by sounding out the public about the need for increasing the tax and non-tax revenues, going forward. Austerity measures will also become inevitable.

Also read: Kerala announces ₹20,000 crore second Covid package

“We will formulate a comprehensive plan for revenue enhancement and expenditure reduction. Preliminary activities have already begun. But it may not be the right time now for cutting spends and raising taxes,” he said.

Hopes of better tax compliance

“One thing is clear. If everyone starts remitting their due tax, our fiscal stress could be easily overcome. People will be ready for that. They have appreciated our work by contributing liberally to the CM Distress Relief Fund. I am sure that our citizens will be similarly enthusiastic and diligent in remitting their due taxes.”

The government does not believe in tax collection by intimidating and coercing traders and industrialists. “Once trade and industry grow, they will be ready to remit more tax. We will strengthen our efforts to identify and penalise evaders. Fresh revenue sources will be explored once we come back on growth track,” the minister said.

Fresh Covid package

Balagopal announced a second Covid Package of ₹20,000 crore which would help the state face the socio-economic and health challenges emerging from the second wave.

Through this package, ₹2,800 crore will be spent towards facing the health emergency situation, ₹8,900 crore for disbursing money directly to those who are in crisis due to the loss of livelihood, and ₹8,300 crore towards interest subsidy for loans provided for economic rejuvenation.

State of readiness

“Impact of the second wave needs to be minimised at any cost. We should prevent the onset of the third wave by playing to our strengths and capabilities. In the worst case, we will keep our health infrastructure and support systems ready to face the challenge,” Balagopal said.

This is what compelled the government to present this revised budget. On the health front, it intends to implement six new initiatives. Among these is proposal for a new Liquid Medical Oxygen plant with 150 mt capacity, 1,000 mt reserve storage capacity and a tanker fleet for supply.

Centre modelled on CDC

An institution modelled on the Centre for Disease Control, US, will be a future asset for medical research and mitigation of contagious diseases. The institution will be envisaged as a centre of excellence capable of providing multi-disciplinary skills in controlling contagious diseases.

Vaccines will be made available to all free of cost as soon as possible. “Certain policy decisions of the Centre still create hindrances here. We will resolve all these and will provide vaccines for all,” Balagopal said. ₹1,000 crore is set apart for vaccines for all above 18 years of age and ₹500 crore for purchase of allied equipment.

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