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Sustainable Consolidation: Suggesting the Way Ahead for Kerala

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  • T.M. Thomas Issac
  • R. Mohan

Abstract

The paper examines the fiscal scene of Kerala, during the last one and a half decades, by looking at the trends in receipts and expenditure. It finds that a revenue led fiscal consolidation is the way ahead not only for sustaining and expanding the intervention in social sector, but also for stepping up capital outlay. The latter is essential for a better infrastructure, which will induce a faster growth, higher revenue mobilisation and thereby make fiscal consolidation sustainable. For achieving this, the focus will be on more intensively tapping State’s own tax potential. Using data from NSSO‘s 68th round of Consumption Expenditure, the study estimates that actual Sales Tax/VAT collections is below potential by at least 29 percent. The methodological problems in selecting appropriate base, which proxies own tax potential also find mention in the study.

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  • T.M. Thomas Issac & R. Mohan, 2016. "Sustainable Consolidation: Suggesting the Way Ahead for Kerala," Working Papers id:10789, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:10789
    Note: Institutional Papers
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    References listed on IDEAS

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    1. K.P. Kannan & K.S. Hari, 2002. "Kerala's Gulf connection: Emigration, remittances and their macroeconomic impact 1972-2000," Centre for Development Studies, Trivendrum Working Papers 328, Centre for Development Studies, Trivendrum, India.
    2. Dina Pomeranz, 2015. "No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax," American Economic Review, American Economic Association, vol. 105(8), pages 2539-2569, August.
    3. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    4. Nicky J. Welton & Howard H. Z. Thom, 2015. "Value of Information," Medical Decision Making, , vol. 35(5), pages 564-566, July.
    5. Garg, Sandya & Ashima Goyal & Rupayan Pal, 2014. "Why tax effort falls short of capacity in Indian states: A Stochastic frontier approach," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-032, Indira Gandhi Institute of Development Research, Mumbai, India.
    6. P.B. Rakhe, 2003. "Estimation of tax leakage and its impact on fiscal health in Kerala," Centre for Development Studies, Trivendrum Working Papers 347, Centre for Development Studies, Trivendrum, India.
    7. R. Mohan & D. Shyjan, 2005. "Taxing powers and developmental role of the Indian states: A study with reference to Kerala," Centre for Development Studies, Trivendrum Working Papers 375, Centre for Development Studies, Trivendrum, India.
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