Kerala’s economy grew by 9.97% in 2024-25, up from 9.30% the previous year, but the higher growth failed to boost the state’s tax collections, according to the Comptroller and Auditor General’s (CAG) report tabled in the assembly on Tuesday. The state’s revenue receipts recorded a paltry annual growth of 0.30% in FY 25, while the state’s own tax revenue (SOTR) buoyancy remained significantly below 1%, falling from 1.89% in 2022-23 to 0.35% and 0.31% in 2023-24 and 2024-25 respectively. The state, however, contributed 3.78% to India’s GDP in the year, which was marginally higher than in previous years. This contribution had been declining over the previous two years, the report said.
The CAG presented a grim picture of the state’s finances during the year in contrast to the claims of the former LDF govt. State lotteries accounted for 77% of non-tax revenue and 14% of the state’s own revenue, but net receipts from lotteries declined by Rs 140.51 crore during the year. This was mainly due to an increase of Rs 204.58 crore in expenditure under “distribution of prizes and commission for agents”.
While central tax devolution grew significantly by about 14%, grants-in-aid from the Govt of India (GoI) declined by 42%. This was primarily due to the discontinuation of the post-devolution revenue deficit grant under Finance Commission transfers, in line with the recommendations of the 15th Finance Commission, the report said.
Total expenditure grew by 8.97% during 2024-25. A major increase in revenue expenditure was recorded under social security pensions, amounting to Rs 6,736 crore, of which Rs 6,641 crore was routed through the govt company Kerala Social Security Pension Ltd. Devolution of funds to local self-govt institutions (LSGIs) increased by Rs 5,227.70 crore to Rs 15,348.04 crore during 2024-25, constituting about 10% of revenue expenditure.
Committed expenditure in the form of salaries and wages (Rs 41,550.15 crore), interest payments (Rs 29,138.23 crore), pensions (Rs 27,875.21 crore) and subsidies (Rs 1,856.60 crore) accounted for 64.40% of revenue expenditure and consumed nearly 80% of revenue receipts.
“We also noticed the irregular withdrawal of unspent public contributions amounting to Rs 262.06 crore relating to the Chief Minister’s Distress Relief Fund (CMDRF) into the Consolidated Fund of the State. This understated the revenue deficit and fiscal deficit of the state by Rs 262.06 crore,” the report said.
The CAG noted that during the past 10 years — except in the case of the fiscal deficit during 2022-23 — the state’s fiscal indicators relative to GSDP exceeded the aggregate levels of all states (excluding Union Territories), indicating a weaker fiscal position compared with other states. The growth rate of overall debt exceeded GSDP growth during 2024-25. The debt-stabilisation metric, which remained positive between 2021-22 and 2023-24, turned negative in 2024-25 due to a rise in the primary deficit, impairing the state’s ability to leverage economic growth for debt stabilisation.
The CAG concluded that the state govt needs to take immediate measures to augment its own revenue to offset the decline in grants-in-aid and keep SOTR buoyancy above 1%. The state should also continue efforts to clear arrears in tax assessment and collection.
“Further, we recommend that state govt make proactive disclosures on its off-budget borrowings in the state budget and in documents submitted to Govt of India. State govt should also take immediate measures to regularise excess expenditure pending since 2016-17 and curb the recurring trend of excess expenditure under various grants,” the report said.
Source from: https://timesofindia.indiatimes.com/city/kochi/cag-flags-states-weak-revenue-growth-low-tax-buoyancy/articleshowprint/131949486.cms
