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“With Revenues Down, It’s Getting Tough To Support The Social Sector”

Finance minister of Kerala, Dr T.M. Thomas Isaac on the health of the state's economy and the measures taken to revive it.

“With Revenues Down, It’s Getting Tough To Support The Social Sector”
Photograph by Ravisankar K.V.
“With Revenues Down, It’s Getting Tough To Support The Social Sector”
outlookindia.com
2016-11-18T17:06:58+05:30

The finance minister of Kerala, Dr T.M. Thomas Isaac, who is also an economist, talks about the health of the state’s economy,  measures taken to revive it, the Gulf crisis and the challenges the Pinarayi Vijayan government faces. Excerpts from an interview with Minu Ittyipe:

Falling oil prices, the naturalisation (nitaqat) process in operation in Saudi Arabia and other Gulf countries, the war in Yemen...through all this, Kerala has seen a steady stream of Gulf returnees. How big an impact will the Gulf crisis have on the state’s economy?

Kerala is highly dependent on remittance flows from outside—the total annual ­inflow is about 32-35 per cent of our Gross State Domestic Product (GSDP). This has significant implications on consumption in the state, which exceeds production. As per the National Sample Survey data, Kerala ranks among the top two states in per capita consumption. This has resulted in improved sales as measured by bank deposits. Investment wise, it has largely been construction and trade rather than the production sectors. Therefore, you find Kerala is a service-dominated economy. Now, the policy challenge before the government is in how to utilise the remittance inflow to ensure that it impacts the production sec­tors in a way that leads to the generation of quality jobs suitable for the educated workforce. Now that the policy initiative has been taken, we have a calamity in the Gulf. So far remittance inflow has decelerated, but it has not become negative yet. But the impact is already being felt on consumption in Kerala. You find tax revenues coming down, an indicator that the business turnover is on the downslide.

How far have the tax revenues fallen? You wanted to increase revenues.

Tax revenues were growing at...

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