THIRUVANANTHAPURAM: In what could be seen as a major embarrassment to the LDF government, the Economic Review 2017 and the CAG’s Annual Accounts for 2016-17, both of which were tabled in the Assembly on Thursday, reveal that the state’s tax revenues have declined and deficits have swollen substantially after the LDF government had taken over.
The former UDF government’s poor tax mobilisation effort was slammed by the LDF; finance minister T.M. Thomas Isaac had even come out with a ‘white paper’ that said that poor growth in tax revenue was the result of corruption and maladministration. It has now turned out that Dr Isaac had fared worse than his predecessor K.M. Mani. The Economic Survey 2017, however, attributes the poor tax growth under the LDF to demonetisation. In 2016-17, the growth in tax rate plummeted to 8.6 per cent. During the UDF government’s last fiscal (2014-15), a time when Mani was buffeted by corruption charges and had to resign, it was 10.12 percent.
The fall in non-tax revenues, a component that Dr Isaac is keen to improve, is even more glaring. During the UDF tenure the growth in non-tax revenue was always more than 30 per cent, in 2012-13 touching even 61 per cent. The first two fiscals under Dr Isaac saw a growth of just 15 per cent. Under Dr Isaac, both revenue and fiscal deficits have shot up to historical highs. The CAG’s finalised accounts show that Dr Isaac had managed to dramatically bring down revenue deficit to Rs 9,656.81 crore in 2015-16 from Rs 13,795.9 crore during 2014-15, the UDF government’s last fiscal. But the very next fiscal there was a sharp increase in revenue deficit to Rs 15,484.59 crore, which was 2.36 per cent of the GSDP. Fiscal deficit too, after a marginal increase during LDF government’s first fiscal, shot up to Rs 26,448.35 crore (4.4 per cent of GSDP).
The survey provides an explanation on why fiscal consolidation faltered. Falling revenues and the consequent widening of deficits. “The purchasing power and economic activity in the state were severely affected by demonetisation,” it says. “Economic activities in sectors such as coir, handloom, agriculture and allied activities came almost to a standstill. The co-operative sector was on the verge of shutdown. Demonetisation led to a fall in GSDP and revenues,” it adds.
