by Moiz Mannan
The tiny south Indian state of Kerala, which likes to be known as “God’s own country”, urgently needs to answer to itself how long it would continue to rely on the money sent home by millions of its diaspora abroad.
On the one hand, the remittances from non-resident Keralites — mostly in the Gulf region — has been growing year on year, and on the other, the state has had to borrow money from the apex Reserve Bank of India to meet the government’s day-to-day expenditure.
In the last financial year, non-resident Keralites sent home more than Rs726bn, which was 46 per cent more than in 2011. On the flip side, last month the Kerala government was forced to borrow Rs 1bn from the country’s central bank.
In 2013-14 too, the state had to knock on the doors of the RBI for ‘ways and means’ loans adding up to over Rs1.3bn to meet the government’s daily expenditure.
There has been a sharp rise in Kerala’s fiscal deficit that is expected to reach 3.10 per cent of gross state domestic product (GSDP) in financial year 2015. Expenditure has grown by 20 per cent while revenues are far less buoyant at 11 per cent. The revenue deficit for 2015 is estimated at 1.53 per cent of GSDP. Under the state FRBM Act, Kerala is required to have zero revenue deficit.
Experts believe that the tight financial situation has been brought by sluggish revenue collection, high spending on salaries and advances.
Kerala is entitled to avail of ways and means loans up to
Rs2.5bn. If the ceiling is required to be exceeded the state would slip into overdraft. Planners dread that this wholly unwanted situation might come as a result of the sharp revenue drop owing to the new liquor policy.
According to a report by Times News Network, the government has decided to further borrow
Rs5bn from the open market. With this, the government borrowings from open market would touch Rs69bn against the approved cap of Rs125bn.
According to the results of the sixth and latest edition of the Kerala Migration Survey, the remittances by Kerala’s non-residents have grown from Rs136.5bn in 1996 to Rs726.8bn in 2014.
According to the researchers, remittances from non-residents were 1.2 times the revenue receipt of Kerala, 4.9 times the money that the state got from the centre as revenue transfer and 1.5 times the entire government expenditure. Besides, this is sufficient to wipe out 60 percent of the state’s public debt.
The study also found that a large proportion of the money sent home was used up to construct houses or purchase consumer durables and electronic gadgets such as cell phones.
What is interesting to note is that the rate of growth of remittance has accelerated in recent years in spite of the slowing down of the annual increase of emigration from the state since 2008.
Meanwhile, according to data released at the State Level Bankers’ Committee meeting in Thiruvananthpuram earlier this week, NRI deposits with commercial banks increased from Rs299bn in March 2008 to
Rs941bn in June 2014. The year-on-year growth was Rs182bn as in June 2014, recording a whopping growth of 24 per cent.
Notably, of the total NRI deposits, 63.88 per cent was from semi-urban areas and the share of the urban and rural areas was 32.73 per cent and 3.39 per cent respectively.
It has been observed that blue collar workers are the ones most regular in remitting money to India.
According to one unofficial estimate, more than $35bn of total $71bn total remittances to India received last year were mostly from low-paid workers in the Gulf. Exchange officials in the Gulf are of the view that between 15 to 20 per cent of the high-income NRIs in the region do not remit money regularly
to India.
Having said that, there is a bunch of NRI billionaires from Kerala who’ve given more than a fair share to their home state. Only last month, NRI businessman M A Yusuffali announced a Rs2m seed fund for startups in Kerala. It is estimated that Yusuffali has been instrumental in providing jobs to nearly 24,000 Malayalees.
Until last year, his group had invested around Rs19.6bn in projects in Kerala, according to an Economic Times report.
Similarly, Gulf-based Keralite Ravi Pillai’s RP Group was said to have pumped in Rs15bn or so in Kerala, having made investments in the state’s tourism, health and trading sectors. Among other major bulk contributor’s to Kerala’s economy are
P Mohamed Ali’s Mfar Group and PNC Menon’s Sobha Group.
Yet again, rather than put its house in order and make the most of all this NRI money, the state government is drawing plans to tap the diaspora to finance its expenditure.
The special committee set up by Chief Minister Oommen Chandy has been tasked with finding out ways and means to garner additional financial resources from non-resident Keralites.
Ironically, according to the Migration Survey report, the state’s failure to provide jobs to young, educated people is a major cause for their migration to the Gulf.
The Peninsula
