- After suffering a deterioration in their fiscal position due to the implementation of the UDAY scheme in the years FY16 and FY17, most of the states recorded an improvement in the fiscal deficit numbers for FY18 with the fiscal deficit to GDP ratio restricted to below the mandated 3 percent mark.
- There were a few exceptions though, for example, Bihar, Kerala, Madhya Pradesh, Odisha, Punjab, Rajasthan and Telangana. Their fiscal deficit ratio stood above 3 percent mainly due to a shortfall in revenue receipts. From this list, only Rajasthan has budgeted the deficit number to fall below the 3 percent mark in FY19.
Good performers on the fiscal deficit front fare poorly on capex spending
- It is interesting to note that states such as Maharashtra, Gujarat, Haryana and Tamil Nadu, which had reined in their fiscal deficit below 3 percent in FY18, have done so at the back of a lower capital outlay as a percentage of GSDP as compared to the national average.
- In contrast, states such as Bihar, Odisha, Rajasthan etc, the higher fiscal deficit exceeding 3 percent in FY18 was accompanied by a higher capital outlay as a ratio of its GSDP. Their social sector spending was also at respectable levels.
9 out of the 17 states under consideration saw central transfers as the primary source of revenue
- For states such as Bihar, Andhra Pradesh, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Uttar Pradesh and West Bengal, central transfers were the main source of revenue while for others own tax revenue is the primary source in FY17.
- Among the major states, which depend on their own taxation system as the main source of revenue- Kerala, Punjab, Rajasthan, Telangana, Haryana, Gujarat and Tamil Nadu- are expected to see a rise in their own tax revenue. GSDP ratio in FY18 from their FY17 levels.
Economic growth in Kerala posts a jump in FY17 on broad-based sectoral improvement
- Kerala’s economy grew at a higher pace of 7.4 percent in FY17 as compared to 6.8 percent growth posted in the previous fiscal year. The acceleration in growth was underpinned by an improvement in growth in all the broad sub-sectors except services.
- Agriculture sector moved to positive territory in FY17 after posting three consecutive years of contraction. While industrial growth also almost doubled in FY17 from the previous year.
Investment indicators show an impressive performance in Kerala owing to favourable state government policies
- It is interesting to note the revival in investment activity in the state is born from the 82 percent rise in gross capital formation growth in FY16. It is hoped that the wide range of policies and incentives for businesses provided by the state government would lead to further improvement in the gross capital formation rate.
- FDI equity inflows in Kerala rose to USD 454 million in FY17, a massive jump from the previous year’s USD 90 million.
Kerala has the highest sex ratio among all the states
- As per the assessment of the socio-economic profile of the state by the World Bank, Kerala has experienced a steady decline in poverty since 1994. As a result, poverty levels in the state are among the lowest in the country.
- However, on the socio-economic indicators, Kerala has shown a mixed performance. While the state has seen the highest sex ratio among all the states in India, the enrolment in primary schools has shown a downward trend over the years.