Kerala’s Fiscal Scene: Gathering Clouds of Crisis?

R Mohan

The IUP Journal of Public Finance, 2007, vol. V, issue 3, 16-36

Abstract: The study examines the major indicators of Kerala’s finances and finds signs of a crisis. They are: (a) revenue deficits increasing as a proportion of Gross State Domestic Product (GSDP); (b) falling own tax buoyancy; (c) declining share of Central taxes and grants; and (d) rising debt-GSDP ratio. Capital outlay has fallen and revenue deficit occupies a substantial portion of fiscal deficit. But statistical analysis shows that revenue receipts and revenue expenditure cointegrate and move towards equilibrium in the long run. The debt-GSDP ratio has also not become theoretically unsustainable, because nominal growth rate of the economy is higher than interest rates on debt. The study concludes that appropriate policy initiatives can prevent the indications of crisis from gaining momentum.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjpf:v:05:y:2007:i:3:p:16-36

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