Kerala, the first state in southern India, to be visited by 15th Finance Commission from 28th to 31st May 2018

Kerala has performed well in social sector; however, social sector spending on ageing population will be a matter of concern

The Fifteenth Finance Commission of the Government of India is visiting the state of Kerala from 28th to 31st May 2018. The Commission led by the Chairman Shri N.K.Singh, Members – Shri Shaktikanta Das, Dr. Anoop Singh, Dr. Ashok Lahiri, Dr. Ramesh Chand and Secretary Shri Arvind Mehta along with other officials will assess the state of the finances of Kerala and the progress made in socio-economic field. Ahead of this visit, Commission understood various aspects of it from Accountant General of Kerala in New Delhi.

Kerala is the 10th largest economy in India and contributes around 4.2% of India’s GDP. Its GSDP growth rate was around 7.4% at constant price in 2016-17. State has one of the highest per capita GSDP and per capita income. In the absence of a substantive pick up in agriculture and manufacturing, the Kerala economy is largely supported by a booming service sector. The high wages (above national average) (both male and female field labour) has a bearing on cultivation and other economic activities.

NRI remittances have a major role to play in Kerala’s economy. Emigration and emigrant’s remittances continue to sustain much of the Kerala economy. Other activities in the State, particularly, in the fields of trade, real estate, and construction are also weakened by any decline in foreign remittances.’

Kerala has been one of the most developed and progressive states in terms of development indicators like poverty ratio, health parameters, education parameters as well as per capita income. Kerala scores better in almost all aspects vis-à-vis national averages.

Population in the working age group 15-59 years have been growing at lower rate. Hence, due to increased life expectancy and better healthcare, population above 60 years of age will be larger in near future. Therefore, social security spending of the State government will be a matter of concern.

Kerala’s literacy level is the highest amongst all the states at 94% of the population. However, learning outcome is not commensurate.

Kerala is somewhat different from the other South Indian states in that the mainstay of the public transport system in the state is the private stage carriages (PSC). Whereas PSC is a very small percentage of the total number of stage carriages in Andhra Pradesh, Karnataka and Tamil Nadu, it accounts for about three fourths of the total number in Kerala.

The Finance Commission needs to make an in-depth Study of the recent developments and future possibilities of economic growth and development of Kerala. This will be based on the various interactions and meetings that the Commission is scheduled to have in Kerala during its visit. Kerala is the first state in the southern India that will be visited by the Fifteenth Finance Commission.

The Commission will have meetings with Chief Minister, Ministers and other officials of the state. Detailed presentations will be made on the finances of the State Government. The Commission will also meet leaders of various political parties, Representatives of Trade and Industry. There will also be an interactive session with Urban Local Bodies and Panchayati Raj Institutions.

State finance assessment to examine Kerala's fiscal position, economic structure, and ageing related social security pressures. Fifteenth Finance Commission will undertake a comprehensive fiscal assessment of Kerala's public finances and socio economic trajectory, focusing on revenue and expenditure patterns, economic composition including service sector predominance and remittance dependence, and demographic pressures such as an expanding elderly population that will affect social security and health spending; the Commission will base its analysis on detailed state presentations and stakeholder meetings to inform prospective fiscal recommendations.