THIRUVANANTHAPURAM: Dr Thomas Isaac’s chivalry (never before has a finance minister been so generous to women) has not masked the shocking schizophrenia he exhibited on Friday. It was only months ago, while presenting his last budget on March 3 last year, that Isaac had shown imperious contempt for Arun Jaitley for reducing expenditure during the time of recession. He called it an “absurdity”. However, on Friday, after years of championing the Keynesian strategy of pumping as much money into the economy to beat the recession, Dr Jekyll Isaac turned Mr Hyde.
“Stringent fiscal discipline is inevitable,” he said. Dr Isaac, who had always treated any suggestion of reducing fiscal deficit with supreme disdain, has turned ultra conservative with a vengeance. It is not as if the recession has suddenly blown over, it has only gotten worse; this is a time when even the sales tax revenue from an inflationary product like petrol is falling. The 2018-19 Budget, in other words, is the ‘manifesto of prudence’, a confession of sorts, of a former liberal. He has downsized the fiscal deficit for 2018-19 to 3.1 per cent; it was 4.3 per cent in 2016-17, and 3.3 per cent in 2017-18. (Last year Isaac had mocked at Jaitley for bringing down the fiscal deficit to 3.2 per cent when the permissible limit was 3.5 per cent.) The revenue deficit for 2018-19, too, has been compressed to 1.6 per cent.
The FM has hinted that he will go about consolidating the finances with ruthless efficiency. The revenue expenditure on social and development services — which include spending on education, health and agriculture — has been so drastically cut that it is now the lowest in a decade. He also intends to reduce the outgo of salaries and pensions from the state’s own tax revenue from 80 per cent to 70 per cent. This will be achieved mainly because the there will be no burden of salary and pension arrears during the 2018-19 fiscal. Also, and this could be wishful, Dr Isaac estimates that the GST revenue will pick up dramatically during the fiscal absorbing the normal increase in salaries and pension.
The finance minister believes that the GST would grow by 20 per cent next fiscal, a growth never achieved in the last decade. This fiscal, the actual growth was just 8 per cent and it was compensation from the Centre that allowed the GST revenues to grow by 14 per cent. However, if the GST revenue has to grow at 20 per cent, consumption has to pick up. For this, huge money has to be invested in major public works like roads bridges and buildings. And this is now done mostly through KIIFB, a hat from which Dr Isaac is yet to pull out the magic rabbit.
However, even if only Rs 4,270 crore, the amount transferred to the Board by the state, is invested, it could provide a huge stimulus to a state dulled by recession. This looks probable given that projects worth over Rs 18,000 crore have already been given administrative sanction by the Board. Though Dr Isaac a spoke a lot about social welfare measures, most were sweet talk — hi-tech schools and housing for all and well-stocked hospitals — carried over from last year. All of them piggyback on KIIFB. As for the Budget, Dr Isaac appeared determined to cut flab.
“On any account, as happened in 2017-18, we cannot bear the increasing pension and salary expenses,” he said. Nonetheless, he failed to demonstrate the political stamina to go the distance. He raised fair value by 10 percent and upped basic land tax but was reluctant to touch user fees and lease rents, at least some of which were fixed long before Isaac had even decided to become an economist.
