Thiruvananthapuram, May 28: The State finances is likely to witness higher revenue and fiscal deficits due to COVID related economic crisis, Kerala Governor Arif Mohammed Khan said in his customary policy address at the inaugural session of the 15th Kerala Legislative Assembly on Friday.
The downturn in the growth of Gross State Domestic Product (GSDP) would naturally have its adverse consequences on the State’s revenue receipts, he said.
It has already witnessed a decline of 18.77 percentage in 2020-21 as against the original budget estimate.
Though the State expected a sharp rise of 37.87 percent growth in revenue receipts in 2021-22, the consequences of lockdown necessitated by a surge in COVID-19 cases, is likely to constrain this, Mr Khan said.
The Governor said the last year was an extremely difficult one for the state’s economy and the society. It is estimated that our Gross State Domestic Product (GSDP) would decline by about 3.82 percent in 2020-21.
“We expected a sharp recovery in the economic growth to 6.60 per cent in 2021-22. But the second wave of the COVID-19 pandemic can be an impediment to this expectation. Once we achieve a higher growth rate, we can grow out of the deficits and debt,” he said.
As per the estimates of the 15th Finance Commission, the State’s GSDP is expected to grow at 13.1 percent in the five-year period of 2021-26. The state has been placed in the category of highest growing States.
The state needs to achieve this projected growth rate to meet the emerging challenges. But this task has been made harder by the unprecedented challenges consequent to the pandemic.
Mr Khan said Kerala achieved high levels of plan and social sector spending, including on health, in the last financial year through higher levels of borrowing which has pushed our debt to GSDP ratio to over 36 percent.
Consequent to the strident demand of the States including Kerala, the Union Government relented to raise the annual borrowing limit from 3 to 5 percent of the GSDP. However, only 0.5 percent of this
additional borrowing limit was unconditional.
“We have been successful in getting the entire 1.5 percent additional borrowing limit based on conditionalities relating to the power sector and public distribution system,” he added.
