Efficient allocation of funds is the challenge

Kerala budget 2018-19 will be a challenge for Finance Minister Thomas Isaac as it is the first post-GST budget. GST has left fund-raising options to non-tax revenue, borrowings and Special Purpose Vehicle ventures such as KIIFB. Fiscal discipline and efficient allocation of expenditure receive prominence in this context.  More state intervention is needed in the form of geriatric homes, health insurance and welfare schemes for the elderly population, comprising 13 percent of the total population.  The urban population comprising 48 per cent is another focus area. More provision in the budget must be earmarked for urban infrastructure, including housing, drinking water, sewage, drainage, waste management, slum improvement and poverty eradication. Alternative strategies such as public private participation and SPV can be explored.

Though absolute poverty of the state is only 11 percent, 57.66 percent of SC and 61.68 percent of ST families face deprivation. The deprived population is asymmetrically distributed. In Palakkad, 42.22 percent of rural households are deprived compared to 20.3 percent in Ernakulam. Hence, spatial disparity must be taken into account while addressing social deprivation. The capital outlay of the state, though small, is not productively utilized. It is only 1.28 percent of GSDP and out of this 36 percent is allocated for public works with a meagre share of 7.04 percent, 7.02 percent and 4.47 perecnt respectively for agriculture, irrigation and industry in 2015-16. A shift in the direction of utilization of capital outlay is needed.

Canalizing private funds towards development activities is another priority. Though there is high deposit mobilization in the state, the credit-deposit ratio is only 62 percent as compared to 112.6 percent in Tamil Nadu. Raising CD ratio depends on better investment climate and ease of doing business. Deposits of cooperative banks are not properly used as the share of priority. Agriculture sector calls for incentive packages for food crops. Its share to total cropped area is only 10.2 percent. Innovative technology for productivity improvement, price stability packages and market intervention are needed for cash crops, particularly coconut and rubber. Also, raise the share of livestock sector from its present 1.04 percent of value added for employment generation in rural areas.

Manufacturing must be increased from current GSDP share of 9.97 percent by emphasizing medium, small and micro enterprises. Out of total MSME units in 2015-16, units promoted by SC, ST and women were 3.84 percent, 0.72 percent and 24.97 percent respectively. MSME promotion not only leads to higher growth, but draws socially backward communities towards the development mainstream.  Out of 126 PSUs, only 50 units make profits, owing to lack of modernization and professional management. Most traditional industries such as coir and handloom need technological upgrade and market intervention.

The low work participation rate in terms of Labour Force Participation Rate (LFPR) and Work Force Participation Rate (WFPR) is of real concern. LFPR and WFPR are respectively 50 percent and 43.8 percent. Only 5 percent of casual workers enjoy paid holidays and other social security benefits. Social security protection for casual labour enhances inclusive development.  Innovative schemes are needed for educated youth as the youth unemployment in Kerala is 18 percent compared to 9.2 percent for the country.  In higher education, most universities struggle for resources to meet expenses even for recurring academic activities, including research and development. 

The growth of non-communicable diseases such as cancer is phenomenal. Increasing out-of-pocket expenditure for treatment throws the majority of the people into poverty and debt trap. This has to be addressed through suitable insurance packages. Tourism is underutilized, contributing 9.9 percent of direct employment and 13 percent of indirect jobs. Public-private participation will change the scene. Prioritize the promotion of renewable sources of energy, particularly solar as renewable source accounts for only 14.44 percent of total installed capacity.  The outcome from public expenditure must be strictly monitored with social auditing. 

(The author is associate professor, University College, Thiruvananthapuram)