Kerala's Financial Crisis - Current Struggles of the state.

Recently RBI has categorized Kerala among five highly stressed states. This shows that Kerala is one of the worst financially managed state. The condition was so severe that government is not able to pay salaries, pension, provident fund etc. to government employees.

Some Facts related to the financial position of the state:

• The revenue deficit of Kerala as a percentage of state gross domestic product be 3.17% for 2021-2022, higher than all state average of 0.46%. (In simple terms, it means that Kerala's government spent more money than it earned in the 2021-2022 fiscal year, and this deficit was 3.17% of the state's total economic output (Gross Domestic Product or GDP). This percentage is higher compared to the average deficit percentage for all states, which is 0.46%. Essentially, Kerala's deficit is relatively higher compared to other states.)
• The fiscal deficit rate of Kerala to be 4.94%, compared to average of all states is 2.80%.(It means Kerala's fiscal deficit rate of 4.94% means its government borrowed money equivalent to nearly 5% of its economic output (GDP) in 2021-2022, which is higher than the average borrowing rate of all states, which stands at 2.80%.)
• Now the economic facts say that the revenue deficit must be almost equal to zero, as it shows the burden of the state, as this deficit have no return value.
• Now the recent economic review of Kerala 2023, tabled in the Assembly said that the state has effectively reduced its revenue deficit to 0.88% from 2.23% of GSDP( Gross State Domestic Product) in 2021-22.

From all this we can say that the state of Kerala hasn’t been able to earn higher profit or earn higher share of revenue from the taxes. This was the reason that RBI has categorized Kerala as worst financially managed state.

The Developments in the current economic scenario of the state :

• Kerala government went to Supreme Court to urge central government to relax the borrowing limit, and also urge centre to give the relief package to Kerala to deal with the current situation.
• Supreme Court also urged the central government to provide the relief package and consider rescuing Kerala and provide a bailout package to tackle the financial crisis of the state.