The composition of state government expenditure changed post-COVID 19 across the Southern States with substantial increase in the share of social sector in Kerala. Highest increase in subsidy expenditure of 67 per cent is also registered in Kerala.
Positive growth registered in revenue expenditure across all the Southern States, despite the fall in own tax and non-tax revenue. But only Kerala and Andhra Pradesh registered a positive growth in capital expenditure.
More than 100 per cent hike in revenue and fiscal deficits in all the Southern States, except Tamil Nadu (fiscal deficit of 89 per cent), and the corresponding swell in borrowing are the common features of all the southern states during the COVID-19 pandemic period. However, the fiscal performance of Kerala is better as compared to Karnataka, Andhra Pradesh and  Telangana during Q1 2020.
Kerala's state finances (April-August) shows a remarkable increase in subsidy expenditure (259%) which is a clear indication of state's intervention to contain the catastrophe of pandemic by providing necessary social security programs for the wellbeing of the people.

Various rating agencies estimated the contraction rate of Indian economy to be around 10 per cent in Q2. It shows the pain that the lockdown and social distancing followed by COVID-19 has inflicted on the Indian economy as it wrecked various economic activities. State finances in India are affected severely due to the outbreak of COVID-19. In the October issue of Kerala Economy, based on an analysis of CAG data, it was observed that own revenue mobilisation has become an issue of much concern for both Kerala and Tamil Nadu during the COVID-19 pandemic (Singh and Anitha Kumary, 2020). This article is a comparative analysis of the fiscal positions of all the southern States during the COVID period. In the analysis that follows, we shall compare Q1: 2020 with Q1: 2019.
Pattern of expenditure
The total expenditure, which comprises of revenue and capital expenditure, shows an increase in Q1:2020 vis-à-vis Q1:2019 in Andhra Pradesh, Kerala and Telangana with no change in Tamil Nadu and Karnataka. The highest growth is observed in Andhra Pradesh (118 %) , followed by Telangana (33%) and Kerala (16%). Highest growth in expenditure in Andhra Pradesh is on account of the alarming expenditure of interest payments.
In the case of revenue expenditure we see a positive growth across the States. The highest growth being in Andhra Pradesh (113%) followed by Telangana (45%), Kerala (16%), Karnataka (6%) and Tamil Nadu (2%).When it comes to capital expenditure also the maximum growth is observed in Andhra Pradesh (160%) with Kerala having the second highest growth (22%). Kerala's actual capital expenditure growth could be even more if we consider the extra budgetary expenditure incurred through Kerala Infrastructure Investment Fund Board (KIIFB).Karnataka, Tamil Nadu and Telangana experienced a negative capital expenditure growth of -57per cent, -37per cent and -32per cent, respectively.
The fiscal measures to handle the pandemic adopted by Kerala appears remarkable as is evident from the components of revenue expenditure and its sector-wise pattern. Within the revenue expenditure, the expenditure on subsidy has recorded the highest growth in Kerala (67%) during Q1:2020 as compared to Q1:2019 followed by Telangana (50%) and Andhra Pradesh (36%).  
During Q1: 2019, the share of social sector expenditure in total expenditure was the lowest in Kerala (30.5%) and highest for Andhra Pradesh (59.5%), whereas the share of general sector expenditure was the highest in Kerala (53.9%) and lowest in Andhra Pradesh (17.8%). (Table 1) The composition of expenditure, however, changed substantially during the COVID period across the Southern States with a decline in the share of social sector expenditure in Andhra Pradesh (-9.4 % points) during Q1:2020 compared to Q1:2019. Rest of the Southern States experienced a rise in the share of social sector expenditure in Q1:2020 vis-à-vis 2019 with an increase of 10.8 per cent points in Kerala, 10 per cent points in Karnataka, 2  per cent points in Tamil Nadu and 0.1 per cent point in Telangana indicating a highest increase in the share of social sector in total expenditure in Kerala. One of the important features of expenditure observed in Kerala is the sharp decline in share of general sector expenditure from 53.9 per cent to 40.5 per cent. This is an indication of strong response of Kerala in addressing the Covid 19 pandemic.
Table 1. Composition of expenditure during Q1:2020 and Q1:2019 ( %)

Source: Computed from C&AG (2020)
 

Note: General services include mainly expenditures on organs of State, fiscal services, interest payment and servicing of debt, administrative services and pension. Social services include mainly expenditures on education, health and family welfare, water supply, sanitation, housing and urban development, labour and employment, social security and nutrition. Economic Services includes mainly expenditures on, agriculture and allied services, rural development irrigation and flood control, energy, industry and minerals, transport, communications, science, technology and environment and general economic services
Pattern of revenue
The total revenue of the states comprises of revenue receipts and capital receipts. The capital receipts include borrowings and other liabilities, recovery of loans and advances and other receipts. The revenue receipts, which comprises of state's own tax revenue, non-tax revenue, share in central taxes (SCT) and grants-in-aid, show a negative growth in all the southern states with an exception in Andhra Pradesh (34.8%) (Table 2).Both own tax and non-tax revenue recorded negative growth in all the Southern States in Q1:2020 compared to Q1:2019 with a sharpest decline in both own-tax and non-tax revenue in Kerala.
Table 2. Growth in total receipts and its major components ( %)

Source: Computed from C&AG(2020)
 

Although own tax revenue growth in Andhra Pradesh indicates a decline, the State shows a positive growth in revenue receipts which can be correlated with the positive growth in SCT and grants-in-aids in the State. Positive growth in SCT has been registered only in Andhra Pradesh and Telangana while being negative in rest of the southern states, Kerala (-28%), Karnataka (-28%) and Tamil Nadu (-26%).The shock of the lockdown is still reflected on the own tax revenue collection of the Southern States. The negative growth in the own tax revenue collection in the Southern States resulted in huge growth in the borrowings in Q1: 2020 compared to Q1: 2019 with a highest borrowing of 478 per cent in Karnataka, 256 per cent in Andhra Pradesh , 180 per cent in Telangana, 113 per cent in Kerala and 89 per cent in Tamil Nadu.

Deficits and borrowing position
The comparative analysis of the deficit indicators suggests that revenue deficit (RD) increased by more than hundred per cent in all the Southern States (Figure 1). For Karnataka, Andhra Pradesh and Telangana the growth in RD has been more than 200 per cent. The growth in fiscal deficit is also more than 100 per cent for all the states other than Tamil Nadu (89%).
Figure 1. Growth in deficit indicators in southern states  in Q1 2020 over 2019 ( %)

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