Private investments and job creation can lead Kerala to fiscal resilience, says IIM-Kozhikode economist

The State budget for 2024-25 in Kozhikode prioritizes capital expenditure and asset creation, but needs to increase revenue collection.

The State Budget for 2024-25 presented by Finance Minister K.N. Balagopal has commendable proposals for prioritising capital expenditure and asset creation across the State, according to Rudra Sensarma, Professor of Economics at the Indian Institute of Management-Kozhikode, (IIM-K).

He said that State Budget has many announcements for infrastructure development, particularly in the transport and tourism sectors.

“However, Kerala’s own tax revenues are budgeted to rise by only 8.4 % which is insufficient when revenue expenditure is set to grow by 10 %. Clearly, the government needs to increase its efforts for revenue collection,“ Prof Sensarma added.

The Finance Minister has lamented in his Budget speech that Kerala received only ₹21 from the Centre against its own tax collection of ₹79, while states like Uttar Pradesh get significantly more. However, it must be pointed out that tax devolution of the Centre is always based on who needs more support rather than equal distribution of funds, he said. “ Unless the underperforming States are provided extra support, the nation cannot sustainably grow,“ Prof . Sensarma added.

Kerala, he said must instead focus on attracting private investments and creating high quality jobs, to make it less dependent on Central government funds or foreign remittances.