Kerala, considered a leading State in terms of welfare provision, has been in the news recently following the death by suicide of a differently abled man who did not receive his monthly pension of ₹1,600 on time. The State government claims that it is unable to discharge its welfare obligations, of which pensions are only a part, as it is restrained by the Government of India from borrowing to fulfil them. It has petitioned the Supreme Court to arbitrate on the issue of whether the Centre can so constrain States. It would seem that in a federal polity the Centre has no authority to overrule States’ decisions on matters related to their own finances, except where the Government of India guarantees the loans of State governments. Anyway, the Supreme Court’s ruling on the matter should be out soon, and the constitutional validity of Central limits on further borrowing by the Government of Kerala would be settled. But legality is not the crucial question here. It is the economic rationale for Kerala accruing more debt at this juncture.
It may be thought that Kerala’s fiscal challenge is due to its unusually high spending on public services. Actually, Kerala is not the State that spends the most on welfare. In 2022-23, per capita public spending on ‘social development and economic services’ was four times higher in Goa than in Kerala. While the share of Central taxes in total revenues is greater for Goa than it is for Kerala, it is not much higher. The real difference is made by the fact that Goa mobilises more resources than does Kerala. In 2022-23 its per capita own tax revenue was 2.1 times that of Kerala and per capita non-tax revenue was 4.6 times. It is also significant that Goa has in most years of late funded public services from its revenue receipts.
Spotlight | Woes of those who wait for social security pension in Kerala
