Among southern states, Kerala and PA register positive growth in capital spending
Despite the decline in own tax and non-tax revenue, positive growth was recorded in revenue spending in all southern states during COVID-19.
But only Kerala and Andhra Pradesh recorded positive growth in capital spending. The composition of state public spending has changed over the period with a substantial increase in the share of the social sector. The largest increase in subsidy spending of 67% was also recorded in the state.
More than 100% increase in government revenues and deficits in all southern states except Tamil Nadu (89% budget deficit), and the corresponding increase in borrowing are common features of all states during the pandemic period.
A comparative analysis of “public finances of southern states after COVID-19” carried out by Anitha Kumary L. and Parma Chakravartti of the Gulati Institute of Finance and Taxation (GIFT) showed that the state’s budgetary performance is better compared to states such as Karnataka, Andhra Pradesh, and Telangana in the first quarter of 2020.
Kerala’s finances in April-August 2020 show a remarkable increase in grant spending (259%), which is a clear indication of the response to contain the pandemic by providing the necessary social security programs.
Total spending, which includes income and capital spending, shows an increase in the first quarter of 2020 compared to the first quarter of 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%).
In terms of revenue spending, the strongest growth is in Andhra Pradesh (113%), followed by Telangana (45%), Kerala (16%), Karnataka (6%) and Tamil Nadu (2%). In capital expenditure, the maximum growth is observed in Andhra Pradesh (160%) followed by Kerala (22%).
Kerala’s real capital expenditure growth could be even greater if extra-budgetary expenditure incurred through the Kerala Infrastructure Investment Fund Board (KIIFB) is taken into account.
The fiscal measures to deal with the pandemic adopted by Kerala appear remarkable, as evidenced by the components of revenue expenditure and its sector structure. In the first quarter of 2019, the share of social sector expenditure was lowest in Kerala (30.5%) and highest in Andhra Pradesh (59.5%), while the share of social sector expenditure was general sector was highest in Kerala (53.9%) and lowest in Andhra Pradesh (17.8%).
One of the main characteristics of expenditure observed in Kerala is the decline in the share of general sector expenditure from 53.9% to 40.5%. It is a sign of a firm response to the pandemic.
Tax revenues, which include the state’s own tax revenues, non-tax revenues, the share of central taxes and subsidies, show negative growth in all states except Andhra Pradesh (35% ).
The shock of the foreclosure is still reflected in the collection of tax revenues. The negative growth in own tax revenue collection led to huge growth in borrowing in the first quarter of 2020 compared to the same period in 2019 with the highest borrowing of 478% in Karnataka, Andhra Pradesh (256%), 180 % in Telangana. , 113% in Kerala and 89% in Tamil Nadu. The comparative analysis of deficit indicators suggests that the revenue deficit has increased by more than 100% in all states.