Recent developments in Kerala state finances

This paper covers recent trends in a series of broad indicators of the financial health of the Government of Kerala with its developmental policy as the backdrop. It examines fiscal balances in Kerala that are not only important for macroeconomic reasons and Finance Commission mandated incentives but also for its own fiscal sustainability, and identifies revenue expenditures as the prime but not the sole determinant. The paper notes improvements in several fiscal indicators in the areas of indebtedness and expenditure pattern but relative stagnation in revenue mobilisation; it concludes that further fiscal consolidation is both necessary and feasible, pointing out some broad measures to achieve the same. Keywords: Kerala, state finances, deficits, expenditure pattern, fiscal liabilities, taxation JEL Classification: H7, H81, O23