Kerala's interim budget

COME ELECTION TIME and the political connotations of budgets race to the foreground. Implicit in Kerala's interim Budget are the constraints of any pre-election exercise in public policy - that of an incumbent not binding future Governments to fiscal commitments. The last possible official opportunity before the elections to present to the legislature the economic status report of the Left Democratic Front (LDF) Government has been used by the Finance Minister, Mr. T. Sivadasa Menon, to try and gain as much advantage as possible ahead of the polls. As is the case in many States, the weak financial position of Kerala is at the root of a host of complications that have to be faced by the next Government. Mr. Menon's Rs. 399-crore deficit Budget has been announced against the backdrop of a setback in economic performance, triggered by falling prices of agricultural exports. Increased borrowings, poor revenue realisation and deferred payments are some of the woes which would have to be tackled in the months ahead. While the focus on education marks a continuity, considerably more needs to be done in the area of Information Technology. The substantial progress made in revenue realisation from tourism - in a State blessed with tremendous natural beauty and which has been rated as one of the best tourist destinations in the world - needs to be consolidated with more innovative measures.

Mr. Menon's strong arguments for greater fiscal federalism merit serious consideration and should to be taken, in the present context, as more than ideological or political posturing. Addressing head-on the issue of declining federal finances, the Left Democratic Front Government has highlighted a problem that has acquired worrying dimensions - States being financially persuaded to fall in line with the Union Government on economic issues. While dwindling finances from the Union Government have affected the performance of other States as well, Kerala has stated the position more forthrightly than, say, Andhra Pradesh or Tamil Nadu. Mr. Menon's contention that subjecting a State's public debt to fiscal therapy infringes the powers of State Governments raises an issue of a very fundamental nature - one that has constitutional ramifications as it touches upon the nature of the federal character of the State. Rather than being dismissed as rhetoric, it is an issue worthy of dispassionate political debate. At the core of the LDF Government's position on Union-State finances is its well-known disagreement with the process of economic liberalisation as has been carried out since the beginning of the 1990s. It is one thing to believe that a broad consensus at the State level on economic policy would benefit the country, and quite another to say that it is alright to achieve this through enforced discipline.

As Kerala heads for the elections, much of the focus is bound to be on the political performance of the LDF Government. That there are political restraints on raising new taxes is understandable, yet a firm resolve to mop up non-tax revenues would have served the State well. On a larger level, the least the Government should have done is to draw up a road-map that is broadly indicative of improving fiscal performance. Clearly, blaming the Union Government alone will not do at a time when the onus of economic development is shifting rapidly to the States. The Kerala Government's criticism of the Union Government's ``readymade solution'' - structural reforms at the State level - needs to be seen not as a defiant posture, but as a manifestation of the differences within the country over the economic reforms process, which has been on for a decade now.

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