State urged to improve revenue buoyancy and quality of expenditure

Speakers at a colloquium organised by the Comptroller and Auditor General of India and the Indian Council of Social Science Research (ICSSR) here on Monday underscored the need for Kerala to improve its revenue buoyancy and quality of expenditure for streamlining its fiscal structure. They also urged the State to make use of borrowings to create productive assets.

Vishnukanth P.B., Accountant General (Audit - 2) Kerala, said Kerala should focus on recovery of revenue arrears and tapping the potential of non-tax revenue sources. “The State should diagnose why its revenue buoyancy is not improving. It has to review non-GST taxes, prevent leakage, focus more on recovery of arrears and unlock the potential of non-tax revenue,” he said.

The colloquium, hosted by the University of Kerala, was themed on ‘State of the Finances of Kerala and Waste Management in Urban Local Bodies.’

For improving the quality of its spending, Mr. Vishnukanth said, Kerala should prioritise schemes and institute effective appraisal mechanisms and periodic evaluation. He stressed the importance of active debt management and better review of State-run public sector enterprises. Mr. Vishnukanth also urged the State to make use of the opportunities offered by the Centre’s Special Assistance to States for Capital Investment (SASCI) scheme.

C. Veeramani, Director, Centre for Development Studies (CDS), also pointed to Kerala’s “very rigid expenditure pattern and low tax buoyancy,” as major issues facing State finances. Adding to these problems are the high committed expenditure and loss-making State public enterprises, he said. “Kerala has achieved remarkable outcomes, but its fiscal structure is under deep structural stress, and that raises concerns about long-term sustainability about its development and the Kerala Model that we are all proud of,” he said.

For Kerala, the way forward requires a simultaneous push on revenue broadening, expenditure rationalisation and public sector enterprise reforms. Above all, the State needs a growth strategy that generates private investment and jobs that can make Kerala’s fiscal position self-sustaining, Prof. Veeramani said.

Both Mr. Vishnukanth and Prof. Veeramani underscored the need for Kerala to wisely manage debt. Kerala should adhere to the golden principle that borrowings should be used to create productive assets and revitalise the economy, Mr. Vishnukanth said. According to Prof. Veeramani, “Kerala borrows at rates comparable to the national average but uses that borrowing for current spending rather than capital formation. That violates the cardinal principle of ‘borrow to invest.’ Here we are borrowing to consume,” he said.

Speaking on the occasion, ICSSR Member Secretary Dhananjay Singh stressed the importance of access to quality data for researchers. ICSSR invests great importance in advanced research in social and human sciences, with impact assessments on government spending in the social sector being a priority area. One of the major challenges ICSSR researchers face is accessibility to quality data, be it from financial institutions or ministries, according to him.

Preethi Abraham, Accountant General (Audit - 1) Kerala, Institute of Surveys and Studies director Hari Kurup and University of Kerala Vice-Chancellor Mohanan Kunnummal were among the speakers.