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`Improve inflow of extra-budgetary resources'

Girish Menon

State should push for more Central investments and FDIs, says expert


  • Finds weak linkage between receipts and expenditure in budgetary policy
  • Says returns from public enterprises and social services are little

    Thiruvananthapuram: Kerala should focus more on improving the inflow of extra-budgetary resources such as Central investments, foreign direct investment and institutional finances without being bogged down by a doctrinaire approach, said the former Planning Board member K.V. Nambiar.

    In an interview to The Hindu here, Mr. Nambiar, who is at present chairman of the Guruvayoor Devaswom Board, said a major drawback of the State's budgetary policy was the weak linkage between receipts and expenditures incurred on different services provided by the State. This was reflected in the low yield of non-tax revenues.

    Kerala's non-tax revenue (comprising mainly interest receipts, dividend on investment, general services and examined services such as forestry) as a proportion of the State's total revenue receipts was only 6.4 per cent (2003) as against 15.3 per cent in Andhra Pradesh, 7.9 per cent in Karnataka and 8.9 per cent in Tamil Nadu. The State's interest receipt was only Rs. 36 crore while the dividend amount was a paltry sum of Rs. 10 crore, he said.

    Quoting the latest Economic Review of the State Planning Board, Mr. Nambiar, who was Planning Board member secretary and Planning Secretary in the UDF Government, said the returns from public enterprises and social services, especially education and health, were very little while the Government continued to make huge investments. The rates for the public services were fixed years ago and had not been changed even though per capita income, wages and salaries had increased, he said.

    He said Plan implementation was not efficient by any yardstick. There was no proper prioritisation in the selection of major projects, constituting a negation of the planning process, Mr. Nambiar said pointing to the huge time and cost overruns of major irrigation projects.

    Mr. Nambiar called for a re-look at Kerala's plan development in terms of the relationship between economic and social development and the nature and content of social policies and welfare programmes, besides the State's role in their implementation. "The growth-induced structural transformation of the economy has created a fragile base with the share of the productive sectors in the State Domestic Product going down significantly. A declining share of agriculture, a stagnant industrial sector, and a rising share of service sector are the emerging trends in Kerala's State income".

    He said the growth of the service sector was mainly due to the large inflow of foreign remittances (10 per cent of SDP). Many paradoxes of the State's development would vanish if a total picture of State income, including remittances, were taken into account. As remittances were not included in SDP computation, it was not fair to compare the State's performance with others in the matter of tax income ratios, elasticity of taxes, growth in ST, excise and motor vehicle tax. Higher outflow on wages, pension, welfare scheme and interest charges had forced Kerala to sacrifice long-term capital formation, with capital investments coming down over the years, Mr. Nambiar said in reply to a question. He said Central investment has been falling, while Kerala accounted for only Rs. 275 crore of the Rs. 68,106-crore that had come into India as Foreign Direct Investments between 2000 and 2005. Kerala's share of assistance from All India financial institutions such as Nabard, Life Insurance Corporation and others was very low. The credit given by banks constituted a much smaller ratio when compared to other southern states.

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