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Five charts that explain the crisis in Kerala’s economy

Discussion in 'World Economy' started by omya, Nov 19, 2017.

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  1. omya

    omya Lt. Colonel ELITE MEMBER

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    [​IMG]
    The expectations are unusually high from Kerala finance minister Thomas Issac, who will present the first budget of the Left Democratic Front on Friday.

    Bengaluru: The stark reality about Kerala is that there are no funds left in the state treasury for capital expenditures like construction of roads or bridges, Kerala governor P. Sathasivam said, while addressing the maiden session of the 14th state assembly on 24 June.

    In this context, the expectations are unusually high from economist-turned-politician and Kerala finance minister Thomas Issac, who will present the first budget of the Left Democratic Front, which won the May assembly election in Kerala, on Friday.

    Ahead of the budget, the minister tabled before the house a white paper on the state economy last week, which says the finances of Kerala are in dire straits. A close look at the white paper shows what went wrong in the economy of Kerala, a state that is otherwise known for high levels of prosperity in many ways.

    Slow pace of revenue growth



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    Like any other state, Kerala’s revenue comes from three major streams—tax revenue, non-tax revenue and central funds. The white paper notes that the pace of growth of the state’s revenue has been falling—the five-year average growth rate of total state revenues was 17.2% in 2006-11, compared with 14.20% in 2011-16, as the above chart shows.

    Interestingly, this is despite the significantly higher Central funding the state received in the last few years because of the devolution of funds for states as per the 14th Finance Commission. Receipts from the Centre to the state grew by 40% in 2015-16 when compared to the previous year, as per the finance department.

    The reason why the total revenue receipts are not forging ahead at a relatively greater pace is because of the sluggish growth of the state’s own revenue, as per the white paper. The share of the state’s own tax revenue in total revenue receipts fell from 64% in 2006 to 58% in 2016 after having peaked to an all-time high of 70% in 2011, it said.

    Slow growth of commercial taxes receipts


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    High levels of tax collection are actually what sustains the coffers of Kerala, as per the finance department. They constitute the lion’s share of the state’s own revenue mobilisation. However, after steadily increasing between 2008-09 and 2012-13 (in 2012-13, almost 51% of the state’s total revenue was from commercial taxes), it has been on a declining curve, so much so that the 17.75% growth in this head in 2006-11 period has dropped to 14.26% in 2011-16.

    Huge increase in non-plan expenditure



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    Despite the inability to generate high levels of revenue, Kerala seems to be spending way out of its pocket. The white paper points out the high levels of non-plan expenditure as an indicator of this trend. Between 2013 and 2016, the non-plan expenditure of the state, after leaving out salaries, interest and pension—which are committed liabilities—was at the highest levels in the last decade, it said.

    “Evidently one of the factors that aggravated the financial crisis during the tenure of the previous Government has been the failure to control avoidable Non Plan Revenue Expenditure,” said the paper.

    Cash reserves in the treasury



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    Kerala chief minister Pinarayi Vijayan admitted in an earlier interview to Mint that the state is fiscally “weak”.

    Weak would be too modest a descriptor, if cash reserves in the treasury is any indicator of a state’s fiscal health.

    Between 2011 and 2015, the treasury’s closing balance has nosedived from Rs.3,514.22 crore to Rs.142.65 crore, the last decade’s lowest level. The treasury balance has been recorded as Rs.1,643.99 crore in 2016, but this, the white paper argues, is a result of payments of approximately Rs.1,800 crore blocked at the treasury and the government levels. Issac has argued in the ongoing assembly that former finance minister K.M. Mani showed a positive cash balance through this way, while in reality the state was maintaining a negative balance in 2016. Mani has denied this accusation.

    An almost empty treasury is worrying for the new government also because the state has about Rs.10,000 crore immediate liabilities to meet in the short term, said the white paper.

    Missing the bus on fiscal goals



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    As per the fiscal responsibility frameworks implemented both at the state and the Central levels, Kerala was supposed to manage its revenue deficit (RD) and fiscal deficit (FD) to gross state domestic product (GSDP) at 0% and 3% respectively, said the white paper.

    While RD is the difference between the net income generated, and the net income projected, FD is the difference between a government’s expenditure and revenue, excluding its borrowings.

    Successive governments in Kerala were trying to achieve these fiscal goals but after 2011 such efforts seem to have lost track, said K.N. Harilal, former planning board member and economics professor at the Center for Development Studies.

    This is the most worrying aspect about the economy right now, he said. Both FD and RD had shrunk to their lowest levels in this millennium in 2011, but are expanding after that, Harilal said.

    The particularly low numbers of 2016 are because the government was really short of cash and could not finance any expenditure, he said. So, it should be seen as the enormity of the problem rather than as no sign of relief, said Harilal.

    http://www.livemint.com/Politics/Hk...explain-the-crisis-in-the-Kerala-economy.html
     
    Last edited: Nov 19, 2017
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  2. Som Thomas

    Som Thomas 2nd Lieutant FULL MEMBER

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    Taxing foreign liqueur, vodka, gin, whiskey, bourbon, beer/craft beer, tequila and bars ( these fucking morons closed the bars all of a sudden) would make up for the deficits. Less tax on toddy and on Kallu shappu ( toddy shop) would help the the local liqour Industry to provide more employment and in turn help the coconut industry and well as palm trees. Products from coconuts tree and palm tree can be used for export too. These two trees are the life line fodder for elephants. Tax on using elephants for processions for non religious purpose must be taxed. These help the animals to be protected against abuse.

    Last but not the least the fucking communist party labor unions are the main cause for no industry being setup other than the IT industry which fairs much better.
     
  3. Guynextdoor

    Guynextdoor Lt. Colonel SENIOR MEMBER

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  4. Guynextdoor

    Guynextdoor Lt. Colonel SENIOR MEMBER

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    Not having polluting industries is actually proving itself a great thing. Tourism revenues have increased to 7 billion and increasing 20% a year. Pretty soon it’ll be many times what conventional industry gives and all in foreign exchange
     
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  5. nair

    nair Guest

    Kerala economy?????
     
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  6. GSLV Mk III

    GSLV Mk III Captain FULL MEMBER

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    Ever tried Neera ? It's an excellent drink though somewhat costlier. I wonder why the so called 'pro-farmer LDF government' is not promoting it.
     
  7. GSLV Mk III

    GSLV Mk III Captain FULL MEMBER

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    Why not, we are a $120 billion economy :p
     
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  8. Darshan gohel

    Darshan gohel IDF NewBie

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    yeah i tried
     
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  9. nair

    nair Guest

    They can't tax it... that's why
     
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  10. randomradio

    randomradio Colonel REGISTERED

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    The more industrialized your state, the greater the attraction for tourists.

    So industry + tourism is better than only tourism.
     
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  11. Guynextdoor

    Guynextdoor Lt. Colonel SENIOR MEMBER

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    No. Tourism is better than industry.
    Huge amounts of foreign exchange
    No deterioration of quality of life
    All round prosperity
    A petrochemical plant will make money for one company and a few thousand people will get wages
    Tourism the entire money is spread around places and people
    Industry does damage that can affect tourism
    The only industry you should support are those that limit this damage like IT
     
  12. Mayawi

    Mayawi FULL MEMBER

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    1) How is tourism is better than industry? Do you know there is an upper limit to tourism than Industry ? Your not tiny island country you have 3 cr population.

    2) Yes, more people in you state to take your food and services inflating the local economy is great for quality of life .

    3) Yes, all people in state can do massage or bell boy ?

    4)As opposed to hotel chains and their owners getting rich but workers and sweepers in kerala are europeans ?

    5) yes, See the gulf countries that Kerala throng to get $$ or USA or Europe where people wait in queues for tourist visas or h1B, they are ugly hell holes because of industry?

    6) Yup IT mean call centers right? no server no power plant requirement no mining of rare metals.

    You can clearly see why most literate state in this country is not richest in this country . Brainwashed education and hatred of consumerism love of communism. Every country in world failed with communism. Even China failed with communism, later realized and shifted to ideology just to pure one party system with economic liberation.
     
  13. Som Thomas

    Som Thomas 2nd Lieutant FULL MEMBER

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    My family has rubber plantation in Pathanamthitta district. We have lots of coconut trees in between these plantation . We use only coconut oil made from these dried kopra. So we always have habit to eat all the Elam thenga. Our main diet was koyikatta, puttu, mostly coconut based ones.
     
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  14. Mayawi

    Mayawi FULL MEMBER

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    Lol I am bhakt because i told you are wrong ?

    Do you have brain ? Can you think like normal person ? Not like pakistani ? so shit happens in pakistan blame RAW zionists and CIA ? commardes get rebuke or dose of reality obviously they are all sanghees or bhakts. Because your brains got fired so much you stopped thing like normal person or taking comments in constructive way .

    PS : you are just become joker.

    So keep your high tourism economy with trillions of dollars, meanwhile other will move ahead in economy

    PS : illetrate cannot read or write . Try to have normal conversation not behave like mental patient with hatred
     
  15. Guynextdoor

    Guynextdoor Lt. Colonel SENIOR MEMBER

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    You have read only half my post. Read it again I have added more compliments for you.
     
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