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New development agenda, says Isaac

Special Correspondent

Promises to eliminate revenue deficit by 2010-11; charts an independent policy

DEVELOPMENT MATTERS: Finance Minister T.M. Thomas Isaac presenting the State budget for 2007-08 in Thiruvananthapuram on Friday. Photo: S. Mahinsha

THIRUVANANTHAPURAM: Finance Minister T.M. Thomas Isaac has said that what the budget seeks to present before Kerala is a new development agenda that charts a course independent of the Central policies and seeks to eliminate the State's revenue deficit by 2010-'11.

Presenting the 2007-'08 budget in the Assembly on Friday, Dr. Isaac said the Government's attempt would be to engage with globalisation with a sense of pragmatism and the objective of presenting a `Left Alternative' in economic policies. An action plan had to be developed for a changed Kerala in a changing world. The main components of such a programme would include protection of agricultural and traditional sectors, upgrading of general the general standard of public amenities in education, health, etc., switch over to sectors such as IT, tourism and light engineering where Kerala had good competitive edge and provision of physical infrastructure for the growth of these sectors, he said.

The Finance Minister announced that the deficit this year would be higher but, despite this, the Government would clear all arrears due to contractors and DA and welfare scheme arrears. There would be no resort to plan cut. He also assured the House that there was no need for grave concern on the deficit figures. The Government, he said, had a clear fiscal vision and proposed to bring down revenue deficit to below 1 per cent by 2010-'11. "If we are able to rectify even partially the awful setback meted out by the 11th and 12th Finance Commissions, we will be able to eliminate revenue deficit by 2010-'11," he said.

He pointed out that the State's own revenue receipts would have to increase by about 20 per cent if Kerala was to achieve the target of below 1 per cent revenue deficit. The revenue receipts would increase to more than 16 per cent of the State Domestic Product (SDP) by 2010-'11. In 2006-'07, this was only 13.5 per cent. At the same time, the expenditure in 2006-'07 and 2007-'08 would be at record levels due to implementation of pay revision and arrear payments. This would come to more than 19 per cent of the SDP. Cautious planning could bring it down to 17 per cent by 2010-'11, he added.

Coming down heavily on the Central Government's insistence on instant elimination of revenue deficit and the resultant cut in welfare expenditure and the ceiling on borrowings the Centre had sought to impose on the State, Dr. Isaac said though there was no dispute on the need to bring down the revenue deficit considerably or its elimination altogether, this should be achieved through a realistic time schedule and the States must have the freedom to borrow for capital expenditure as and when necessary.

With this end in view, the Government would amend the Kerala Fiscal Responsibility Act and the Keala Ceiling on Guarantees Act.

Pointing out that the main way to reduce expenditure was to check corruption and profligacy, the Finance Minister said a study of expenditure pattern in the public works sector, carried out by the Comptroller and Auditor General as announced in the last budget, had thrown up some shocking revelations. The study revealed that during the three-year period covered by the study, work costing around Rs.500 crore had been awarded without inviting tenders and that administrative sanction had been given for projects for more than eight times the budgeted amount.

There were even instances of cashing of bills without executing the works, Dr. Isaac said.

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