On February 5, 2024, Finance Minister K N Balagopal presented the Budget 2024 for Kerala before the legislative assembly, highlighting the pressing financial issues facing the state. The minister, in his opening statements, emphasised the challenges posed by the current fiscal situation and also about the Goods and Services Tax ( GST ) share from the Central Government.
Particularly noteworthy was the minister’s assertion that the financial crisis in the state is exacerbated by the disproportionately low tax share allocated by the Centre compared to other states.
Citing data from the Reserve Bank of India ( RBI ), the minister stated, “As per the statistics of 2021-23, on the national average, the Centre provides ₹35 for every ₹65 collected by the respective states. However, Kerala receives only ₹21 against its own tax collection of every ₹79. In essence, only ₹21 out of ₹100 constitutes the Centre’s contribution.”
In his budget speech, the minister also provided a comparative analysis of the highest tax share paid to states. According to the data presented, Uttar Pradesh receives ₹46 out of ₹100 from the Centre, while Bihar receives ₹70 out of ₹100.
Addressing the distribution of the divisible pool of taxes collected by the Centre, the finance minister revealed a concerning trend. During the 10th Finance Commission period, Kerala’s share was 3.87%, which has significantly decreased to 2.5% in the 14th Finance Commission and further dropped to 1.925% in the 15th Finance Commission. This decline signifies a substantial loss for Kerala, amounting to tens of thousands of crores.
As the state grapples with these financial disparities, the budget presentation serves as a platform for bringing attention to the need for equitable tax allocation and advocating for Kerala’s fair share in the national tax distribution framework.
As stated in the Finance Minister’s budget address, Kerala’s permissible borrowing limit, according to the Centre’s guidelines, is ₹39,626 crore. The State Budget was formulated with this limit in mind. However, Kerala has been authorised to borrow only ₹28,830 crore thus far. The reduction of the borrowing limit occurred unexpectedly in the middle of the fiscal period, without prior notification, stemming from an inaccurate calculation of the public account balance.
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