Fiscally stressed Kerala wants to tap into investments by non-resident Keralites to help finance its expenditure. The novel proposal by the state government has been set as one of the terms of reference for a special committee set up by the Oommen Chandy-led government this week to find out ways to garner additional financial resources within this year.
Indian states do not have the power to raise funds from abroad, but Kerala, hemmed in by a sharp rise in fiscal deficit that is expected to reach 3.10 per cent of gross state domestic product (GSDP) in FY15, may have few other options.
The state budget presented by finance minister KM Mani last month showed that expenditure has grown by 20 per cent while revenues are far less buoyant at 11 per cent. The revenue deficit for FY15 is estimated at 1.53 per cent of GSDP. Under the state FRBM Act, Kerala is required to have zero revenue deficit.
The panel held its first meeting on Saturday. “Today, we discussed only formatting of the report and no specific issues. We will meet frequently over the next few days to finalise and submit recommendations,” committee chairman KM Chandrasekhar told The Indian Express in a text message.
Chandrashekhar, currently vice-chairman of the Kerala State Planning Board is a former cabinet secretary. He, declined to comment on proposals or timeline for the committee’s report.
The notification detailing the terms of reference says, “The committee will look into the possibilities of augmenting resources from various sources and suggest measures to strengthen state’s liquidity and resource availability….” With a fragile fiscal health, the state has been already forced to raise Rs 2,000 crore in two separate bond auctions by the Reserve Bank of India in April.
Keralites are among the largest Indian diaspora working in several countries including the Middle East and sent back an estimated Rs 75,000 crore last year. Remittances are a key contributor to the GSDP of Kerala.