Economics

Kerala’s Economy

Kerala economy has bettered its growth rate nominally, but at the cost of having its government fiscals debt-squeezed. The Economic Review-2007, admits that the state's public debt has crossed Rs 57,138.71 crore from Rs 45,929.05 crore in the previous year. Growth rate of GSDP (Gross State Domestic Product) is up by 0.1% to 8.1% in 2006-2007. In 2005-2006, this was barely 8%. Per capita income in the state has slightly improved from Rs 31,438 to Rs 31,642 in 2006-2007. As much as 61% of Kerala's GSDP is contributed by tertiary sector. Secondary sector accounts for 22% and primary sector just 17% of GSDP. Meanwhile the public debt is growing at double-digit rates. The rate of growth of debt had actually fallen in 2006-2007 to 8.59% from 9.67% in the previous year before soaring to 14.56%. At constant (1999-2000) prices, the primary sector recorded a growth of 6 per cent, the secondary sector 8.3 per cent, tertiary sector 8.7 per cent in 2006-07.

Corresponding to the debt growth, fiscal deficit (FD) has bloated to Rs 7,425.21 crore in 2007-2009. Last year this was only Rs 3,921.87 crore. With salaries, pensions and interests eating over 77% of revenue income, revenue deficit (RD) was a whopping Rs 5,251.16 crore in 2007-2009. In the previous year, this was only Rs 2637.9 crore. Worst is that less than half of the revenue expenditure is devoted to developmental expenditure. Although the fiscals are not shipshape, the state had, in the last fiscal, set aside over Rs 1000 crore for farm sector. Economic Review-2007 also claims that in the second half of 2007, the state has not seen any farmer suicide. At the same time, the rate of increase in agricultural income has fallen compared to that of 2005. From 6.72% in 2005-2006, the growth in farm income has fallen to 6.17%. Increased foreign tourist arrivals are the prime drivers of the state economy.

The per capita debt of Kerala which was Rs. 7414 in 2001 increased to Rs. 12681 in 2005 as against all state level of Rs. 8343. The per capita debt of neighbouring states in 2005 next to Kerala was Andhra Pradesh (Rs.8427) followed by Tamil Nadu (Rs. 7782) and Karnataka (Rs. 7446). When the debt/GSDP ratio of Kerala in 2005 was 42 per cent, that of neighbouring states and of all states ranged between 27 per cent and 38 per cent. The revenue deficit of the state came down from Rs.3668.30 crore (3.66 percent of GSDP) in 2004-05 to Rs. 2637.94 crore (1.99 percent of GSDP) in 2006-07.

State Income

As per the statistics published by Department of Economics and Statistics, the quick estimate of Gross State Domestic Product (GSDP) at factor cost at constant (1999-2000) prices is Rs. 1,06,832.73 crore during 2006-07 as against the provisional estimate of Rs. 98,817.08 crore during 2005-06, registering a growth rate of 8.1 per cent in 2006-07. At current prices the Gross State Domestic Product is estimated at Rs. 1,32,738.53 crore (quick estimate) during 2006-07 as against the provisional estimate of Rs. 118998.19 crore during 2005-06. The growth rate at current prices is 11.6 per cent in 2006-07 compared to 11.2 per cent in 2005-06.

Tables showing state income

Expenditure Pattern

Revenue expenditure in the state has increased by an annual average rate of 13.74 percent during the period from 1996-97 to 2007-08. The revenue expenditure during 2006-07 was Rs. 20824.57 crore higher by Rs. 2400.80 crore over Rs. 18423.68 crore of 2005-06. The continuously declining capital expenditure in the state which has shown a slight revival in 2005-06, increased in 2006-07 also. The ratio of capital expenditure to total expenditure which was 3.96 per cent in 2003-04 gradually increased to reach 4.19 per cent in 2005-06 and further to 5.67 per cent in 2006-07. Interest, pension and salary are the major items coming under non-plan/non developmental expenditure of the state. During the period 2006-07, the above three commitments accounted for about 77.7 per cent of the total revenue receipt of the state where as it was 80.20 per cent in 2005-06. The rate of growth of interest during 2006-07 over the previous year was 10.28 per cent. Pension was growing at an alarming rate of 15.15 per cent and salary at a rate of 18.54 per cent.

Tables showing expenditure pattern