Mumbai, Mar 24 (PTI) On the back of a massive rebound in nominal growth, Kerala's fiscal performance in FY22 is expected to be better than budgeted as revenue deficit is expected to come in at Rs 24,206 crore or 2.9 per cent of GSDP compared to FY21 budget estimate of Rs 15,102 crore or 1.6 per cent of GSDP, says a report.

According to India Ratings, the revenue and fiscal deficits are expected to be 1 per cent and 2.3 per cent of GSDP as against the budgeted 1.9 per cent and 3.5 per cent.

The revenue deficit is not surprising due to the impact of the pandemic on the economy and given the recovery seen so far, fiscal deficit will come down from Rs 34,950 crore or 4.3 per cent of GSDP in FY21 to Rs 29,295 crore or 3 per cent of GSDP.

According to the report, due to the pandemic, Kerala's revenue deficit for FY22 is budgeted at Rs 16,910 crore or 1.9 per cent of GSDP and it is set to miss even FY21 revised estimate.

The state had reported the first case in the country in late January 2020 and is yet to control the pandemic well.

Revenue deficit, according to the revised estimate of FY21, is expected to come in at Rs 24,206 crore or 2.9 per cent of GSDP as against the FY21 budget estimate of Rs 15,102 crore or 1.6 per cent of GSDP, says the agency.

The revenue receipts declined to Rs 93,115 crore as seen in the FY21 revised estimate, against the budgeted Rs 1,14,636 crore.

At the core of Kerala's FY22 budget proposal was the assumption that the year would witness nominal GSDP (gross state domestic product) growth of 6.6 per cent, which is clearly an underestimation.

In fact, after a significant GSDP contraction in FY21 due to the pandemic, Kerala is likely to see a nominal growth of 13.5 per cent in FY22, much higher than the assumed 6.6 per cent in the budget. The national economy is seen growing at 14.5 per cent in nominal terms, the report said.   

According to FY21 revised estimate, the absolute slippage in fiscal deficit is estimated at Rs 5,654 crore.

The slippage from tax revenue is seen at Rs 33,239 crore of which slippage in state's share in Central taxes is estimated at Rs 11,091 crore and slippage in own tax revenue at Rs 22,148 crore. But a higher non-tax revenue collection of Rs 11,718 crore helped cushion the slippage on revenue receipt to Rs 21,521 crore.

On the other hand, even expenditure was cut by Rs 15,883 crore, of which revenue expenditure was cut by Rs 12,516 crore and capital expenditure by Rs 3,367 crore. Salaries and pensions were slashed by Rs 4,905 crore  and Rs 1,558 crore.

The state's own revenue is budgeted to grow 61.51 crore in FY22, resulting in a higher own revenue/GSDP ratio of 8.34, up from 6.4 in FY21 and 7.3 in FY20.

The pandemic has brought the ratio down to 5.51 in FY21, and FY22 target of 61.51 per cent growth appears a stretched, it said.

Non-tax revenue is budgeted to increase to Rs 38,495 crore from Rs 37,999 crore in FY22, up a meagre 1.31 per cent and this looks realistic, it added.

However, the report warned that the threat from the pandemic on its finances is not over yet. Therefore, the non-tax revenue collection target is also realistic.

Its own non-tax revenue is budgeted at Rs 38,495 crore, up from Rs 37,999 crore in FY21 and Rs 26,281 crore in FY20.

FY22 revenue expenditure is budgeted at Rs 1,45,286 crore which is 23.84 per cent higher than FY21, which looks too ambitious and is led by salaries and pensions which are budgeted to grow 41.77 per cent and 19.03 per cent, respectively.

Revenue expenditure excluding interest, salary and pension is budgeted to grow 22 per cent in FY22, as against a decline of 64.89 per cent in FY21.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)