Two decades after liberalisation, a much-detested word across the state, there are reasons sufficient enough for the state to cheer.
A study by leading economist K.K. George, who is also the chairman of the Kochi-based Centre for Socio-economic and Environmental Studies, points to a better growth rate compared to the national average.
A higher per capita income, poverty alleviation and other social measures can help improve the state’s finances.
The study titled Trends in Kerala State Finances - 1991-92 to 2012-13: A Study in the Backdrop of Economic Reforms in India, says the state may not be affected by the deceleration of the economy to the same extent as the national economy.
There are indications that factors like depreciation of the rupee may help the state to attract large funds from non-resident Keralites and from its exports.
Even during the recession in 2008-09 and 2009-10, the state economy continued to grow with the rate as second highest after Goa.
If the current economic growth trends persist, it can lead to higher revenue from the state’s own taxes, he says.
The worst period appeared after the second half of the 90s and the state’s total outstanding liabilities in relation to the gross state domestic product was coming down, implying that the state’s capacity to service its debt was steadily increasing.
There is a need for further expanding the fiscal space of the state government though the scope is getting increasingly limited.
The option for containing deficits by increasing the tax rates and widening the tax base is also getting limited as in the globalised era, governments want to fall in line with the rates of other competing countries.
The state can strengthen its tax administration, mobilise non-tax revenue and attract larger transfers from the centre.