Oommen Chandy banks on Arun Jaitley to save his budget plans

The fiscal health of the state will depend a lot on GST rollout and how less conservative the union finance minister can be.

THIRUVANANTHAPURAM: The Economic Survey 2016-17, tabled in Parliament on Friday, makes a fervent plea to the centre to retrieve the Goods and Services Tax from the swamp of political one-upmanship.

More desperate would be Chief Minister Oommen Chandy. His generous proposals in the state budget presented early this month are delicately balanced on a shaky revenue estimate, which has a slim chance of realisation only if the GST is rolled out.

During the last three fiscals, the state’s average growth in tax revenue has been 11 per cent; in the last few months it was an alarming 9 per cent.

Mr Chandy, perhaps fearing electoral backlash, has not done anything in his budget to mobilise new taxes either. Still, in a move that defies economic logic, Mr Chandy has gone ahead and pegged the growth in tax revenue for the coming fiscal at 18 percent.

His only source of optimism: the rollout of GST. Any GST roadmap that would be laid down in Mr Arun Jaitley’s budget on Monday, therefore, will sound like a boon to Mr Chandy.

The state will also expect Mr Jaitley to compensate for Mr Chandy’s apathy towards return migrants. “Return migration from the Gulf has already begun and the oil shock will only increase return migration,” said demographic expert Irudaya Rajan.

“I hope the Union Budget will have some schemes for the self-employment of Gulf returnees, or even a liberal loan scheme. Already there are 1.3 million return migrants in the state and an equal number is on the verge of return,” he said.

Involving return migrants in economic activity is one way of increasing spending in a sluggish economy. “Recession has strengthened. The state exports have slowed down and private investment is hard to come by. The agriculture sector is down in the dumps, even the construction sector looks dull. The only way to revive the economy is for the centre to keep fiscal consolidation targets aside and step up expenditure,” said economist Dr K.N. Harilal.

Mr Arun Jaitley is a conservative finance minister. Despite a decline in GDP growth during this fiscal, he has managed to meet the fiscal deficit target of 3.9 percent. This conservative thinking has triggered another fear.

“Jaitley could considerably restrict the scope of centrally-sponsored schemes like National Rural Health Mission and MGNREGS,” said Mr Gopan Mukundan of Kerala Sasthra Parishad. In 2015-16, Mr Jaitley had dramatically reduced the central share for crucial welfare programmes like Integrated Child Protection Scheme (ICPS) and National Health Mission.

Reduced allocations for rights-based programmes could impact purchasing power in a big way, especially in the rural areas of the state. “Bunk shops selling branded beverages and snacks would not have proliferated in rural areas had it not been for the entitlements received from programmes like MGNREGA,” said Planning Board member C P John. Any drop in allocations for such programmes, therefore, will dampen consumption, further accelerating the state’s downward slide.

Dr Harilal said that it would be unrealistic to expect much from Mr Jaitley for the rubber sector. “No government can raise the import tariff on natural rubber above 20 percent as the country is a signatory to the ASEAN agreement which has specified the ceiling for import tariff as 20 percent,” he said.

However, there are specific policies that Kerala could take advantage of. ‘Make in India’, for instance. “The SMSE (small and medium scale enterprises) sector might not be that vibrant in the state. But a prerequisite for manufacturing success is a highly evolved manufacturing services sector. It is here that Kerala has a real opportunity,” economist K.J. Joseph of CDS said.

( Source : Deccan Chronicle. )
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