Kerala’s Covid-19 package close to a Universal Basic Income scheme: Expert panel

Vinson Kurian Thiruvananthapuram | Updated on July 31, 2020

An estimated one crore people were provided with at least ₹1,000 per person and the total amount sanctioned till May was ₹1,021.4 crore   -  Getty Images/iStockphoto

Economic package, amounting to ₹6,851.78 crore, was implemented by the State during the lockdown

A specially constituted expert committee has assessed that the economic package implemented by the Kerala government during the lockdown, amounting to ₹6,851.78 crore, may have come closest to rolling out a universal basic income programme for a bulk of its population, especially the vulnerable sections.

The expert committee was tasked to conduct a study on the impact of Covid-19 and the consequence of lockdown on the different facets of the state’s public finance. The terms of references covered the estimation of losses to the State’s own tax revenue; central transfers; mobilisation of non-tax revenue; liquidity; sectorial impact; remittances; migrant labour; and expenditure control.

The members included KM Abraham, former Chief Secretary; Rajesh Kumar Singh, Additional Chief Secretary (Finance); R Ramakumar, Member, State Planning Board; D Shyjan, Head of Department of Economics, University of Calicut (Special Invitee); N Ramalingam, Associate Professor, Gulati Institute of Finance and Taxation, Thiruvananthapuram (GIFT, expert); and L Anitha Kumary, Associate Professor, GIFT (expert).

First with a revival package

The committee recalled that Kerala was one of the first to announce a larger economic revival package in March, total size of which was ₹20,000 crore and praised by many economists. Dwelling on individual components, the committee noted that ₹4,405.38 crore was spent to disburse seven months welfare pensions at one go to 44 lakh families between March and May.

An estimated one crore people were provided with at least ₹1,000 per person and the total amount sanctioned till May was ₹1,021.4 crore. Community kitchens began functioning from March 25 in all 941 panchayats and, till May, ₹128 crore was on them. People under institutional quarantine also got food delivered from the community kitchens to their locations by volunteers.

Around three lakh migrant workers — called guest workers (athidhi thozhilalikal) — also received the benefit of community kitchens. Kerala was also the first State to distribute free ration to all categories of ration card holders (pink, yellow, blue and white card holders). It had also initiated steps to distribute free ration to those who did not have ration cards by identifying them with their Aadhaar numbers.

Identifying revenue sources

The State government has been in the forefront in containing the Covid-19 spread with its coordinate and innovative approach, both politically and administratively. But expenditure commitments, especially on medical expenses as well as relief and rehabilitation, are increasing exponentially. In this context, identifying additional resources from own tax and non-tax revenue segments for financing additional expenditure is more challenging than ever before.

The GIFT had, in an earlier report in May estimated revenue loss ₹33,456 crore. Building on it, the expert committee assessed that about 59 per cent of this is likely be on account of GST revenues and another 22 per cent of the fall on account of central tax devolution. This amounts to a total of 81 per cent of the estimated fall. Assuming that borrowing remains unchanged, Kerala is left with only the remaining 19 per cent to work on a counter-cyclical fiscal strategy.

Meanwhile, the expert committee noted that as part of the overall strategy to address the pandemic-induced slowdown, the Centre has recently allowed the States to borrow an additional 2 per cent of its GSDP (Gross State Domestic Product) in 2020-21, a major demand raised by the Kerala Government. As a result, the State can borrow an additional ₹18,087 crore during this financial year.

Published on July 31, 2020

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