COVID-19 pandemic lockdown had a catastrophic impact on the already slowing Kerala economy due to demonetisation and two successive floods with adverse impact on people's livelihoods. This in turn has severely affected the state finances of Kerala. There is a whopping increase of 112.9 per cent in the fiscal deficit of the state and the condition may worse unless there is timely disbursement of central transfers and GST compensation. 

State finance in Kerala from April to July 2020

The position of the state's public finances during April-July 2020 period compared to the same period in 2019 is presented in Table 1. Revenue receipts registered a negative growth of 15.6 per cent during the period compared to the same period of 2019. In the case of own non tax revenue, there is a sharp fall in growth rate (79.3 per cent) in July 2020. It is imperative to note that the revenue from the state's own non tax sources was only Rs. 581.8 crore compared to 2808.3 crore in 2019 with a shortage of Rs 2226.5 crore. This could be mainly due to the fall in revenue from lottery.  However, the total non tax revenue registered a positive growth of 72.5 per cent on account of the increase in grants in aid (mainly the Revenue deficit grants as per the 15th FC's interim award) from the Centre. Though, revenue receipts have shown a negative growth of 15.6 per cent up to July 2020, the revenue expenditure registered a positive growth of 7.6 per cent. It is important to note that the expenditure on subsidies increased 36.3 per cent during the pandemic period, all pointers to the State's efforts to ensure a social safety net for its citizens.

Deficit position

The adverse fiscal status of a State is usually reflected on the deficit position. The recorded revenue deficit has been Rs. 17,615 crore for April-July 2020 with a hike of Rs 6383.4 crore compared to the same period in 2019. The recorded growth was as high as 57 per cent.                The fiscal deficit, however, registered a lower growth of only 52.5 per cent.  This clearly indicates the increase in the borrowing and other liabilities. On the liability side there has been a whopping increase of   52.5 per cent.

Table 1. State finance in Kerala:  April-July 2020 over April-July 2019  (Rs. in Crore)

State's own tax revenue

The COVID-19 pandemic had its adverse impact on the tax revenue collection of the State. Tax revenue registered a southward growth of 37.3 per cent during April-July 2020 compared to the same months of 2019 (Table 2). All the components of tax revenue showed a declining trend with GST collection contracting to Rs. 4779.3 crore from Rs.  7342.1 crore.  A concomitant slump in revenue is also evident in the share of central taxes during the same period (Table 2).

Table 2. Tax revenue in Kerala April-July 2020 over April-July 2019 (Rs. in Crore)