THIRUVANANTHAPURAM: An analysis of the state’s financial position shows that its total debt has increased by 80% in the last five years. As per records available in the assembly, the total debt of Kerala was Rs 1,86,453.86 crore in 2016-17 and it rose to Rs 3,35,641.15 crore by 2021-22, registering an increase of 80.01%. The rate of increase in debt was over 10% in these years and the maximum was 18.48% in 2016-17 compared to the previous financial year.
Though government agreed it is facing an unprecedented financial crisis, it said the reasons are beyond its control. It claimed that compared to the previous financial year, the revenue deficit grant fell by Rs 6,716 crore this year and Centre also slashed Kerala’s borrowing limit by Rs 24,638.88 crore by citing borrowings through government agencies (read KIIFB) by considering it as government’s debt.
Meanwhile, experts felt that state’s increasing debt can directly be attributed to government raising funds through agencies like KIIFB.
“This has a direct relation to using agencies like KIIFB to avail loans. The main reason why CAG recommended that funds raised through KIIFB be considered as state debt is because, ultimately, all these are the burden of state exchequer. Government’s sovereign guarantee along with the motor vehicle tax and petroleum cess that go to the exchequer enables KIIFB to raise loans,” said economist Mary George.
Loans raised by government from the market, agencies like Nabard, Hudco, LIC, GIC and foreign loans for externally-aided projects in 2016-17 was Rs 16,151.89 crore. This peaked in 2020-21 to Rs 25,041.51 crore (during Covid-19 when Centre allowed some relaxation in borrowings) and fell to Rs 20,292.82 crore in 2021-22. Till Oct 31 in the current financial year, Kerala has availed Rs 5,135.2 crore as loan.
The reason for financial crisis is that the government is unable to curtail its expenses in proportion to the reduction in grants and market borrowings. Kerala’s crisis is evident from the figures of total debt as percentage of GSDP, which now stands at 37.18% as per budget estimates (2022-23).
“As per 15th finance commission’s recommendations, this should be capped at 25%, which was 29% before. Centre had said government guarantee for PSUs should be considered as state’s own responsibility as it is state’s guarantee that if the PSU fails, it will repay. If that is included, the debt as percentage of GSDP will rise further, showing how grave the financial condition is,” George said.
While government blames Centre for reduced revenue deficit grant, Kerala is the recipient of the largest share of revenue deficit grant as recommended by 15th finance commission from 2020-21 to 2025-26. The state was granted Rs 53,137 crore, the highest when compared to 16 other states which got the grant.
Though government agreed it is facing an unprecedented financial crisis, it said the reasons are beyond its control. It claimed that compared to the previous financial year, the revenue deficit grant fell by Rs 6,716 crore this year and Centre also slashed Kerala’s borrowing limit by Rs 24,638.88 crore by citing borrowings through government agencies (read KIIFB) by considering it as government’s debt.
Meanwhile, experts felt that state’s increasing debt can directly be attributed to government raising funds through agencies like KIIFB.
“This has a direct relation to using agencies like KIIFB to avail loans. The main reason why CAG recommended that funds raised through KIIFB be considered as state debt is because, ultimately, all these are the burden of state exchequer. Government’s sovereign guarantee along with the motor vehicle tax and petroleum cess that go to the exchequer enables KIIFB to raise loans,” said economist Mary George.
Loans raised by government from the market, agencies like Nabard, Hudco, LIC, GIC and foreign loans for externally-aided projects in 2016-17 was Rs 16,151.89 crore. This peaked in 2020-21 to Rs 25,041.51 crore (during Covid-19 when Centre allowed some relaxation in borrowings) and fell to Rs 20,292.82 crore in 2021-22. Till Oct 31 in the current financial year, Kerala has availed Rs 5,135.2 crore as loan.
The reason for financial crisis is that the government is unable to curtail its expenses in proportion to the reduction in grants and market borrowings. Kerala’s crisis is evident from the figures of total debt as percentage of GSDP, which now stands at 37.18% as per budget estimates (2022-23).
“As per 15th finance commission’s recommendations, this should be capped at 25%, which was 29% before. Centre had said government guarantee for PSUs should be considered as state’s own responsibility as it is state’s guarantee that if the PSU fails, it will repay. If that is included, the debt as percentage of GSDP will rise further, showing how grave the financial condition is,” George said.
While government blames Centre for reduced revenue deficit grant, Kerala is the recipient of the largest share of revenue deficit grant as recommended by 15th finance commission from 2020-21 to 2025-26. The state was granted Rs 53,137 crore, the highest when compared to 16 other states which got the grant.
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