Thiruvananthapuram: The state is suffering a major fiscal paradox. It is witnessing a huge drop in revenues at a time when two factors that drive consumption and tax collection are looking up. One, remittances, the biggest driver of consumption in the state, have crossed the Rs 1 lakh ceiling in 2015, and are still rising. Two, the number of registered dealers has swelled. Between 2005-06 (when VAT was introduced) and 2014-15, there was a 70 percent rise in the number of registered dealers. Between 2011-12 and 2016-17, the number of registered dealers increased from 1.91 lakh to 2.72 lakh, an increase of 81,387.
The latest figures put out by the State Level Bankers Committee, the total NRI deposits in the state's banks grew from Rs 1,42,668 crore in June 2016 to Rs 1,54,252 crore on June 2017. (However, the rate of growth fell from 22 per cent to eight percent.) The state’s revenue demonstrated an average annual growth of 20 percent till 2012-13, the second fiscal under the former UDF government. In fact in 2012-13, the growth was a stupendous 24.16 percent. Then, it was a precipitous fall. 2014-15 was the nadir, 8.08 percent. The state has still not risen from the mighty fall. Though revenue growth rose to 14 percent in 2016-17, demonetisation further pulled it down to nearly 10 percent.
The latest report of the Kerala Expenditure Review Committee shows that the growth in the annual earnings from the top five commodities that fetched the state the highest revenue fell by eight to nearly 30 percent. The growth rate in motor vehicle revenue, the highest earner, fell by 21 percent. Cement fell by 15.80 percent. Rubber, 27 percent. Tobacco, 7.64 percent. And gold,18.72 percent. In fact, the average growth rate of VAT collection for 18 out of 22 commodities declined during the period 2013-14 to 2015-16, when compared to 2012-13.
There was administrative failure and, as a consequence, rampant evasion. “But even this cannot account for the alarming fall in revenues,” an economist working closely with the state said. “The LDF government did tighten its grip on tax administration but it has still not had the desired effect. Of course, demonetisation played spoilsport," he added. The deceleration is now seen as one of a piece with an all-India trend. "There is something seriously wrong with the country’s economic fundamentals if people are not spending enough,” the economist said.
