On Friday, 15 January 2021, Kerala’s finance minister, Dr Thomas Isaac, introduced the final budget of the Left Democratic Front (LDF) government for this term. Considering the need to address the economic effects of the pandemic, the budget speech was deemed extremely crucial. It was also important considering the upcoming elections in the State this year.
Finance minister started his budget speech by thanking all Covid warriors.” All necessary funds were provided to health dept for tacking Covid-19. The strength of Kerala’s health department once again received international attention” he said.
Focus on Education, Jobs, and Social Security
The Minister of Finance stressed the goal of transforming Kerala into a knowledge-based society, “with strides in modern employment opportunities and industrial growth while consolidating [the state’s] achievements in the social sector.” Throughout his speech, employment was a key focus area with targeted systems for different sections of the population.
Ensuring laptops for all households, an Rs.100 increase in social security pensions, more jobs in the education section and more institutions and an Rs. 1000 increase in the allowance provided to ASHA workers were among the main announcements.
At a time when the issue of the Minimum Support Price has become a key site of struggle, the minister announced that Kerala will provide the highest MSP in the country for paddy farmers at Rs. 28/kg. Kerala, which is also the only State in the country to offer an MSP for vegetables, is looking at self-sufficiency in vegetable production too in 2-3 years.
The minister also declared that Rs. 15 to 50 lakh families that have blue and white ration cards would be provided with an additional 10 kg of rice.
The public sector’s performance in Kerala was a key highlight of Dr Thomas Isaac’s talk. According to the minister, PSUs and the public health and education sectors have seen significant revivals over the past five years.
Economic Slowdown due to Pandemic and Natural disasters
The economic analysis, presented at the assembly on Thursday, one day before the presentation of the last budget of the LDF government, said that the economic growth rate of Kerala dropped to 3.45 per cent in 2019-’20 from 6.39 per cent in 2018-’19. In 2019-’20, Kerala’s Gross State Domestic Product (GSDP) was Rs 5.68 lakh crore as against the 2018-’19 provisional estimate of Rs 5.49 lakh crore. The study, presented at the assembly on Thursday, said, in addition to highlighting the difficulties ahead, the downward rally had started much before the Covid-19 outbreak.
The economic review suggested grimmer problems in the future. In 2019-20, Kerala’s gross state domestic product (GSDP) was Rs 5.68 lakh crore compared to the provisional 2018-19 estimate of Rs 5.49 lakh crore, thus recording a rise of just 3.45 per cent in 2019-20, compared to 6.39 per cent growth in 2018-19.
The total receipts for 2021-22 are estimated to be Rs. 1,59,427.24 crore, according to the Minister. Rs. 1,59,427.21 crore is the total budgeted expenditure for 2021-22. The tax shortfall is expected to be 1.93 per cent, with an estimated fiscal deficit of 3.5 per cent.
The Economic Review released on Thursday highlighted the magnitude of challenges, especially the combined effect of a number of disasters, including Cyclone Ockhi, two flood rounds in 2018 and 2019, and the infections of Nipah and Coronavirus.
As is the case with the Indian economy, Kerala was also impacted by the economic slowdown. Compared to 2018-19, the economic growth rate of the state in 2019-20 was lower, which also adversely affected tax revenues. The Covid-19 pandemic has led to a further contraction of worldwide economic activity, and Kerala was no exception.
However, the Kerala Budget 2021-22 projects that revenue receipts will increase dramatically in the coming year as the world, the country, and the state recover from the pandemic crisis, allowing for a substantial increase in government expenditure, such as on capital investment and spending on welfare.
The budget speech was the longest in the history of Kerala, at over three hours. The speech on the budget was punctuated by poems written by students from across the state that highlighted the points made by the minister.