The deteriorating effect of the global economic slowdown had its serious impact on the finance of Kerala for the last couple of years and the state is facing serious revenue - expenditure gap. The COVID- -19 pandemic adds to the pain of the state, since spending on social security initiatives and public health is mounting up heavily. The undue delay of   the central government in filling the revenue gap through the timely disbursement of GST compensation adversely affects the fiscal space of state.  The revenue shrinkage coupled with the higher revenue expenditure naturally resort the Government to borrow more. The latest data shows that the borrowing has increased substantially by 112.9 per cent to meet the higher expenditure needs.

Revenue, expenditure, debt and deficit/surplus constitute the four major components of state finance. The revenue entails the State's tax and non-tax revenues and Central Finance Commission's net proceeds to states and other grants-in aid from the Central Government. The finance accounts of Kerala for FY 2018-19 shows 11.9 per cent and 14.1 per cent of Gross State Domestic Product (GSDP)as Revenue Receipts(RR) and Revenue Expenditure (RE) respectively. The revised estimate for 2019-20 was fixed as 11.4 per cent for RR and 13.4 per cent for RE which is a slightly pegged down estimate from the previous year.  During 2020-21 the budget estimate figured at 11.7 per cent and 13.3 per cent of GSDP. These are realistic budget figures, compared to the previous couple of years under normal economic situation. But the effect of COVID-19 emulates with a 'new normal situation' which in turn tumbles the budgeted targets of 2020-21 (Table.1).

Table 1.   State finances - Kerala 2018-19 to 2020-21(Rs. Thousand Crore)