Decoding Kerala FM's 'Thakarilla Keralam, thalarilla Keralam' assertion

“Kerala cannot remain a mute spectator against the hostile approach of the Central government, which is pushing the state towards the worst financial crisis in its history."

This was stated by Kerala Finance Minister KN Balagopal on Monday (February 5) as he presented the state budget, indicating the Pinarayi Vijayan's rising angst over the Union government's fiscal regime.

"We should strive forward with the strong sentiment of Thakarilla Keralam, thalarilla Keralam, thakarkkanavilla Keralathe ('Kerala will not be shattered, Kerala will not tire, Kerala cannot be destroyed'). The government will provide leadership in taking forward our achievements and progress while ensuring that all Keralites stand united in building a New Kerala," said Balagopal.

What was his argument?

Tax devolution, or distribution of tax revenues, is a constitutional provision under which the Centre is obligated to distribute a certain portion of taxes it collects from various sources – individual, corporate and institutional taxpayers under various heads – to states which they can spend using their discretion. This is in addition to transfers for central schemes, Finance Commission grants and capital expenditure loans, among others, from the central pool.

Balagopal gave a call for reclaiming “our legal and constitutional rights” by “espousing the foundational ideals of cooperative federalism”. "We need to reclaim our legal and constitutional rights through strong action by espousing the foundational ideals of cooperative federalism,” he argued.

Raising the bar

The Finance Minister gave a call for raising resources through “capital investments from private and public sectors” and using them efficiently through “out-of-the-box project”, models for “ensuring speedy implementation of all its programmes”.

“Instead of waiting for justice from the Central government, the state government will utilise all its resources to raise capital investments from private and public sectors, thereby ensuring speedy implementation of all its programmes.

"Along with strengthening existing models, out-of-the-box project implementation models that promote efficiency and innovation will also be adopted. We intend to formulate short-term projects that can generate employment and income, in addition to medium and long term projects,” he said.

Figuring out a ‘Plan B’

The Finance Minister stressed the need for a plan B in case the Centre “takes measures to centralize the fiscal system” after the Lok Sabha elections.

Here is what Balagopal said: “The second uncertainty evolves from the Central Government’s neglect of the States in general and Kerala in particular. This neglect towards Kerala reached its zenith during the current fiscal (2023-24). We remain hopeful that the legal battle in the Hon’ble Supreme Court and the political agitation outside the court will improve matters. Also, there are experts who predict that the Centre will soften its stand after the Lok Sabha elections. This Budget is being prepared in the hopes that things will get better. On the contrary, what if the Central Government takes measures to centralize the fiscal system? What if the neglect towards Kerala continues? In such a situation, we will definitely have to figure out a Plan B. We are not ready to make any cuts in the benefits provided by the state to its people. There is no turning back at this stage in development activities either.”

Assuring the people of Kerala that welfare activities will continue despite the Centre’s attitude towards the states, Balagopal said, “The development and welfare activities should continue at any cost; and they will. There are suggestions and thoughts regarding Plan B as well. In any case, we will find a way to move forward retaining the virtues of the Kerala model of development.”

Discrimination against Kerala

In his budget speech, Balagopal said that both Chief Minister Pinarayi Vijayan and he himself have time and again emphasised it how “the excessive centralization of resources and discrimination against Kerala by the Central government in violation of the constitutional principles of federalism is the cause of our financial distress”. The state government undertook the “Nava Kerala Sadas”, a public outreach programme, in November last year to educate the people about the Centre’s neglect.

“Even economists who are critical of the state government agree that there is neglect by the central government. Although they are not ready to join us in the struggle against the Centre, now the opposition also admits that there is neglect. This is welcome. The opposition is also saying that the neglect of Kerala will be raised in the Parliament even if it is late. Seeing that this is a problem that affects the people as a whole, the opposition should be ready to stage protests against the Centre’s apathy, even if they’re on their own,” Balagopal said.

He also decried attempts by certain quarters to misinterpret the state government’s distress calls. “It has to be reiterated that efforts to deliberately misinterpret the government’s statements on financial constraints as evidence of Kerala having come to a standstill or that the State becoming a pauper are attempts at propaganda,” the Kerala finance minister further stated.

Rising state expenditure

He said that the state treasury is functional round the clock and has broken all records of revenue and expenditure. The government will not run away from its responsibilities in the face of rising expenditure, which stood at Rs. 1,58,738 crore last fiscal and is pegged at Rs. 1,68,407 this fiscal.

“The State’s total expenditure for 2020-21 was Rs. 1,38,884 crore. In 2022-23 it increased to Rs. 1,58,738 crore. It is estimated that this will rise to Rs. 1,68,407 Crore by the end of this year. There is an increase of approximately Rs. 30,000 crore over the last three years. The Government has not curtailed any justifiable expenditure. There will be no financial crisis if there is neither development nor welfare expenditure. Some States act in that manner. The Kerala government’s approach is not to run away from its responsibilities,” Balagopal said.

Kerala on the path of fiscal consolidation

Minister Balagopal also took potshots at the opposition UDF which is “ready to criticize the government for squandering money”, particularly on ministers’ foreign travel.

Alluding to the Reserve Bank of India (RBI), he pointed out that Kerala has succeeded in curtailing fiscal deficit and is on the path of fiscal consolidation. “The Reserve Bank reports have indicated that Kerala is on the path of fiscal consolidation and has succeeded in reducing the revenue deficit, fiscal deficit and overall debt. The Accountant General's figures also testify to this.

When it comes to tax and non-tax revenue, the State has attained record-breaking growth in its own revenue,” Balagopal said.