THIRUVANANTHAPURAM: Kerala has been placed among the poorest fiscal performers in the newly released “Fiscal Health Index 2025” by NITI Aayog. Scoring 25.4 on the index, Kerala ranks 15th out of 18 major states for the fiscal year 2022-23. However, there is a slight improvement from its previous average ranking of 16th from the 2014-15 to 2021-22 period.

The top-ranked states in this index were Odisha (67.8), Chhattisgarh (55.2), and Goa (53.6). The report divides states into four categories based on their performance: achievers, frontrunners, performers, and aspirational. Kerala, along with West Bengal, Andhra Pradesh, and Punjab, has been classified as an 'aspirational' state, indicating significant fiscal challenges.

The report highlights that Kerala, like Punjab, faces issues with low Quality of Expenditure and debt sustainability, while West Bengal struggles with revenue mobilisation and debt management.

The Fiscal Health Index (FHI) was calculated based on five key areas: Quality of Expenditure, Revenue Mobilisation, Fiscal Prudence, Debt Index, and Debt Sustainability. Among these, Kerala excelled in Revenue Mobilisation, ranking sixth with a score of 54.2. This was due to a year-on-year growth of 26.5% in its own revenues for 2022-23, along with a Compound Annual Growth Rate (CAGR) of 7.3% over the past five years. Tax revenues increased by 23.3%, and non-tax revenues saw a remarkable growth of 44.5%. This improvement in revenue collection is attributed to various initiatives, including the reorganization of the State GST department.

However, Kerala’s performance was poor in the Quality of Expenditure category, where it scored just 4.2, the lowest among all states. The state’s capital expenditure was only 8.8% of total expenditure in 2022-23, far below the 15.2% average for similar states. Though health and education allocations were somewhat higher than the national average, capital expenditure remained disproportionately low.

In terms of Fiscal Prudence, Kerala ranked 11th, with some improvements in its fiscal deficits. The Revenue Deficit dropped from 3.3% of GSDP in 2021-22 to 0.9% in 2022-23, and the Fiscal Deficit reduced from 5% to 2.5% of GSDP. However, despite these gains, the state’s borrowing remains disproportionately high compared to its economic size.

Kerala’s Debt Index and Debt Sustainability scores were poor, ranking 16th and 15th, respectively. The state’s total liabilities as a percentage of GSDP increased from 30.7% in 2018-19 to 37.6% in 2022-23, which is significantly higher than the national average of 29.8%. Interest payments on debts have consumed a large portion of revenue receipts, accounting for 19% in both 2022-23 and 2023-24, well above the national average of 13.5%.

While Kerala has long been recognized for its strong performance in social sectors like health and education, its fiscal management has raised concerns, particularly due to unsustainable debt levels and low capital spending.

In NITI Aayog’s rankings, Odisha, Chhattisgarh, Goa, and Jharkhand were noted as top performers, classified as 'achievers' for their strong fiscal management. In contrast, Kerala, along with other states like Punjab, Andhra Pradesh, and West Bengal, was grouped in the 'aspirational' category. Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka were categorized as 'front-runners,' demonstrating robust fiscal health through consistent growth in revenues and developmental spending.

Although Kerala has made notable progress in revenue generation, especially through improvements in tax collection, its fiscal position remains under significant pressure due to high debt and limited capital investment.

(Input from various sources)

(Rehash/Sai Sindhuja K/MSM)