Kerala tightens purse as fiscal pressures refuse to ease
Thiruvananthapuram, July 27
With Kerala's finances continuing to remain under strain, the Finance Department has directed all government departments to strictly rein in expenditure while preparing Budget Estimates for the next financial year, underscoring that the State's fiscal position has shown little sign of improvement despite a change in government.
In a circular issued as part of the Budget preparation process, departments have been instructed not to increase expenditure and ensure that revised estimates do not exceed the original budget estimates.
Projects with no tangible economic benefit are to be avoided, while repair and maintenance works that can be deferred should be postponed.
Departments have also been asked to prepare realistic salary estimates and justify any expenditure that exceeds the previous year's level.
Surplus employees need not be retrenched but may be redeployed to fill emerging vacancies.
Non-plan expenditure, excluding salaries, should not be higher than last year's, while department heads have been asked to critically evaluate all schemes before including them in the Budget.
The circular further calls for a review of the need to retain temporary employees and seeks details of pending tax and non-tax arrears, the reasons for such dues, and the steps taken to recover them.
The move comes even as the State's revenue receipts during the first quarter of the current financial year rose to Rs 33,311.21 crore over the corresponding period last year.
However, expenditure and borrowings have also increased, keeping the Treasury under pressure.
The financial squeeze is already being felt by local bodies.
Speaking to IANS, Thiruvananthapuram Corporation Mayor V.V. Rajesh said he had met Chief Minister V.D. Satheesan on Monday and explained the difficult financial position facing the civic body.
"As soon as the new financial year began, the then Chief Minister Pinarayi Vijayan reduced the plan allocation. The present government has also reduced the plan size, leaving the Corporation with a shortfall of nearly Rs 250 crore for the current fiscal while several months still remain. I explained the entire situation to the Chief Minister. He heard me patiently but did not indicate either way," Rajesh said.
Rajesh created history in December by becoming Kerala's first BJP Mayor after his party ended the CPI(M) led Left's more than four-decade control of the Thiruvananthapuram Corporation.
Incidentally, one of the first decisions of the Satheesan government after assuming office in May was to release a White Paper on the State's finances, which revealed that Kerala is burdened with outstanding liabilities of more than Rs 5 lakh crore, highlighting the scale of the fiscal challenge confronting the new administration.
— IANS
Reader Comments
As someone living in Kerala, I can see the impact already. Our panchayat has stopped new road projects and even streetlights are being rationed. But honestly, better to tighten belts now than face a complete collapse later. The previous government spent like there was no tomorrow on welfare schemes without generating revenue.
Interesting that the BJP Mayor is complaining about fund cuts. But let's be real - all three major parties have contributed to this mess. GST compensation ending, reduced central devolution, and our own addiction to freebies have created this perfect storm. Time for Kerala to focus on industrial growth and job creation instead of just consumption.
The circular says 'projects with no tangible economic benefit should be avoided' - that's code for stopping vote-buying schemes. 😅 But on a serious note, redeploying surplus employees instead of retrenchment is smart. Kerala government has way too many staff relative to its revenue. Hope they also crack down on tax evasion in real estate and luxury sectors.
This is what happens when you have decades of high government spending without corresponding economic growth. Kerala's remittance economy is not enough anymore. We need to attract investment, simplify regulations, and stop treating businesses like enemies. The fiscal squeeze will be painful but necessary for long-term sustainability.
One thing I appreciate is the honesty in the white paper. Previous governments used to hide the real debt figures. Now at least we know the scale of the problem. But simply cutting expenditure won't solve it - Kerala needs to expand its tax base and improve GST collection efficiency. Our tax-to-GDP ratio is among
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