National

Kerala hopes to achieve ‘zero revenue deficit’ in 2014-15

Our Bureau Thiruvananthapuram | Updated on March 24, 2013 Published on March 24, 2013

The medium term fiscal policy and strategy statement for the State asserts that the target of ‘zero revenue deficit’ will be achieved ‘through prudent fiscal management.’





Year 2014-15 is expected to mark a turning point in the State’s fiscal history when, as per projections, revenue deficit would be brought down to zero.

Revenue deficit to gross state domestic (RD/GSDP) product has been the only signature parameter envisaged in the revised roadmap for fiscal consolidation consistently failing the State.

PRUDENT MANAGEMENT

The medium term fiscal policy and strategy statement for the State seeks to assert that the target of ‘zero revenue deficit’ will be achieved ‘through prudent fiscal management.’

The State has been able to make a good account of itself with respect to other milestone targets of fiscal deficit to gross state domestic product (FD/GSDP) and debt to gross state domestic product (debt/GSDP).

It has achieved the FD/GSDP target of three per cent in 2010-11 but had fallen back due to over-run of non-plan revenue expenditure resulting from impact of implementation of pay/pension revision.

The target for 2012-13 is 3.50 per cent, and the State was on course to achieving the target, the statement said.

As regards debt/GSDP, the State has surpassed the 26.70 per cent target for 2014-15 already. In fact, this was achieved as early as 2011-12.

DEBT CONTAINED

The only target that has proved elusive has been RD/GSDP. The target set for 2012-13 is 0.94 per cent in 2012-13, which, for the first time, is expected to be met thanks to revenue augmentation.

In 2013-14, this tempo would have to be sustained for improving on this to bring it down further to 0.50 per cent. This will set the ground for the ultimate target for ‘zero revenue deficit’ in the very next year.

Significantly, for the forward estimates period in the medium-term fiscal plan is made based on the assumption that this landmark would be achieved in time.

“This will call for great efforts in terms of revenue expansion and expenditure compression,” the document said. And herein lies the real challenge.

REAL CHALLENGE

What gives some comfort is that ‘effective revenue deficit’ as per revised budget estimates of Rs 609.14 crore is projected to turn a ‘effective revenue surplus’ of Rs 1,202.09 crore in budget estimates for 2013-14.

This is after providing for an increase in capital expenditure of only a little less than Rs 2,000 crore relative to revised budget estimates of Rs 6882.21 crore.

Nominal GSDP is assumed to grow at 14.50 per cent during the forward estimates period (2013-14 to 2015-16) in line with projections for the State by the 13{+t}{+h} Finance Commission.

The 12{+t}{+h} Plan also targets this growth rate with a real GSDP growth of nine per cent and a GSDP deflator (measure of level of prices of all new domestically produced final goods and services) of 5.5 per cent.

This assumption is realistic given the likelihood of a moderation of inflation and the State achieving a high growth path, the document said.

> vinson.kurian@thehindu.co.in

Published on March 24, 2013
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