Kerala Finance Minister Thomas Isaac will present the last budget of the incumbent Left Democratic Front (LDF) government on Friday. In an interview to TNM, prior to the budget presentation, Isaac says that the government plans to create 20 lakh new jobs for the educated, to bring down revenue deficit below 1%, reduce fiscal deficit and increase the state’s revenue by 15%. Optimistic that the Left will return to power in the upcoming Assembly Elections, Isaac believes that there can be no compromise on welfare measures and believes the Goods and Services Tax (GST) should offer more avenues for revenue generation.
“The budget is going to lay the path for post COVID Kerala. The stimulus package is already on. We have a package of Rs 16,000 crore through KIFFB (Kerala Infrastructure Investment Fund Board) of which only Rs 7,000 crore has been spent. This is our infra stimulus package,” he says.
The state FM says that the biggest casualty of COVID-19 has been employment, with Kerala having the highest number of educated persons who are unemployed. “The normal employment programme can’t address the issues of those who are educated but unemployed,” he explains, “The basic theme of this will be through transition of Kerala into a knowledge economy. This means a thorough overhauling of higher education. Production of knowledge, innovation, skilling, promotion of start-ups and knowledge industries will be the focus. This is a total programme and that is the future Kerala.”
Isaac notes that the process may take four-five years. “The budget will set the tone for digitalisation of the economy, the skilling of Kerala’s workforce, and creation of knowledge industries.” He says that for those who are educated, digitalisation will be the focus while for those who are uneducated, small and medium scale industries will be promoted.
Twenty lakh new jobs will be created, of which three lakh will be created in the first year itself, he promises. Isaac is optimistic that the LDF will return to power for a second consecutive term in 2021.
The FM says that the state will also focus on attracting investors in a bid to generate more employment. The government will look at attracting foreign investors who can tie up with the government. The state will also focus on attracting more startups to set up shop in Kerala.
“For those looking to invest in the state, there will be attractive packages at a scale never seen before in Kerala. We plan to offer relaxations on taxation, and even bear social security liabilities,” he adds.
The government will also focus on fiscal consolidation as it looks to reduce debt accumulation. Whatever steps were taken in this direction, Isaac says, were nullified by COVID-19.
The government is targeting a 15% increase in revenue or more, and is also betting on receiving more GST compensation next year. The FM says that they will also look at containing expenditure at an average of 12%, despite salary revisions. “We have done a detailed analysis of GST to ensure that the fiscal deficit comes down to 3% by 2023. We also intend to reduce the revenue deficit to below 1%” Isaac adds.
On the GST front as well, revenue is growing at 10% at present, which the state government wants to increase to 10-15%. Isaac believes that the state has not yet explored the full potential of revenue that GST can generate, and will bring in measures for the same.
He argues that the Union government should either continue with GST compensation or increase GST rates since states need revenue. “By 2023 there will be a drastic fall in the revenue for all states and that is not good for the economy,” he adds.
However, Isaac says that the budget is not aimed with the intention to woo voters ahead of the Assembly Elections, noting that in the LDF government’s first budget the welfare pension was increased to 1000. The move was done despite there being no election around the corner, he says. “But we will definitely improve welfare. We have invested Rs 16000 crore in infrastructure from which the next generation will be benefitted. The government will make sure that the needs of the poor are met. Welfare schemes will be strengthened. That is how Kerala will remain democratic but at the same time growth will be faster,” he says.
The government also plans to operate more quarries to explore rare minerals and natural resources to boost revenue generation. “We need quarries , but we shouldn’t allow private players. When considering the price of rock the margin is high. The government can get the revenue, of course while maintaining the ecological balance,” he says. Quarrying in eco-sensitive areas has been blamed for the recent landslides in Kerala.
Notwithstanding the recent controversies over the Kerala Infrastructure Investment Fund Board (KIFFB), Thomas Isaac said the state-owned financial institution which finances large and critical infrastructure projects, will remain the prime funding source. “I don’t care about the controversies. If the Union government needs to ban KIFFB, they also have to ban National Highway Authority of India. If a Union government body (NHAI) is borrowing, a state government body corporate can also borrow.”
A Comptroller and Auditor General (CAG) report on the state’s finances had claimed that KIIFB’s borrowing model was unconstitutional.