The Kerala government led by Chief Minister Pinarayi Vijayan of the CPI(M) has announced staging a day-long sit-in protest at Jantar Mantar in New Delhi on February 8. This public agitation aims to highlight the state’s long-standing demand seeking greater central assistance and decentralized fiscal federalism.
It comes right after Karnataka’s 2-day demonstration in Delhi over shrinking resource allocation and perceived step-motherly treatment meted out to certain states under the 15th Finance Commission regime. The stir marks an escalation among opposition-ruled states against the Centre’s perceived partisan stance in dividing the national pie.
Key Areas of Discontent
Kerala has identified three major grounds on which it feels shortchanged in financial transfers by the Union government:
- Low tax devolution: Kerala gets only 1.9% of central pool, lowest among special category states
- Inadequate grants: State received ₹3,378 crore revenue deficit grant instead of eligible ₹5913 crore
- Excess cuts: External debt relief worth ₹3,452 cut from grant
The agitation calendar will see state government employees, farmers and mass organizations joining in to echo Kerala’s dissent. Their unified call urges course correction – “decentralization with equity”.
Reasons for Protest
To grasp what triggered the outburst, it is vital to analyze Kerala’s longstanding grievances on fiscal arrangements rooted in its unique model of governance and paradoxical development trajectory.
Kerala Model of Growth
- Kerala’s social indicators like literacy (97%) and life expectancy (77 years) match developed countries
- However, economic indicators lag – GSDP growth rate averaged 7% over 2010-2020, below the national rate of 8%
High Recurrent Expenditure
- FY 2022-23: Kerala budgeted ₹95,000 crore towards salaries, pensions and welfare spending which is 80% of its own tax revenue
Low Revenue Generation
- Tax-GSDP ratio was 10.9% in 2021-22 compared to 16% for Maharashtra
- Share of primary and secondary sectors in GSVA is 19% compared to 40% nationally
- Remittances account for 36% of state income
Persistent Deficits
- Debt stock as % of GSDP increased from 32% in 2016 to 43% in 2022
- Revenue deficit likely to touch ₹17,500 crore or 2.4% of GSDP in 2023-24
Higher Devolution Needed
- Kerala received 1.9% share of central tax pool in 2022-23, lowest among special category states
- Higher devolution required to finance extensive social obligations benefitting over 35 million people
Key Demands
Kerala seeks a fairer federal system where resource allocation matches states’ fiscal disabilities and duties rather than mere population data under the 15th Finance Commission norms. The state seeks revision of Finance Commission devolution framework to include:
Area & ecology
- Kerala constitutes 1.2% land area with higher disaster vulnerability
Structural gaps
- Has 559 km national highways against 51569 km for UP reflecting low asset base
Human development efforts
Priority spending allocation ratio in 2022-23:
- Education: 15% in Kerala vs 6.2% average
- Health: 6% in Kerala vs 2.3% average
Contribution to GDP and taxes
- Tertiary sector contributes 70% economic output but gets low import duty share due to consumption based economy
- Compared to Kerala’s 1.9%, Gujarat gets 3.4% tax share despite weaker social indices
Unless anomaly is corrected, Kerala may see unrest over inability to sustain welfare state model and rising debt:
- Primary outcome indicators already reflect stagnation relative to previous decades.
- Debt repayment as % of revenue expenditure tripled from 11% in 2016 to 33% in 2022.
The following table showcases key reasons behind Kerala’s long-festering disgruntlement with fiscal treatment by New Delhi. Revising settlement formulas to address genuine anomalies will likely pacify dissenting states while strengthening national integration.
| Parameter | Kerala’s Position | Implications |
| Per Capita Income | ₹1.48 lakhs – lower than national average | Weaker economic base to raise own resources |
| Tax Effort | Tax-GDP ratio over 11% – among top 5 states | Already extracting higher taxes, limited legroom |
| Expenditure Needs | 75% revenues spent on salaries, pensions & welfare | Structurally higher spending needs |
| Central Transfers | Get only 1.9% share in central pool – lowest rates | Forced dependence on federal funding support |
| Debt Position | Outstanding liabilities are 43% of GSDP | Fiscal constraints in financing budgets |
The Way Forward
Kerala’s agitation comes amid growing state-level dissent against perceived centralization:
- Share of states in central pool of taxes fell from 42% during 2015-20 to 41% now
- In 2022, at least 7 states reported shortfall in GST compensation dues
Equitable resource sharing is key for cooperative federalism:
- States collectively account for 40% of India’s GDP
- 15th Finance Commission raised states’ share in central taxes from 42% to 41%
- Kerala contributes 4.3% to services exports despite 1.9% devolution share
Solutions must balance fiscal constraints, development needs and growth potential:
- Projected central resources available for sharing with states by 2025-26: ₹19.3 lakh crore
- If devolution raised by 1% can transform state capacities but may entail tradeoffs
Harnessing strengths of all states vital for national progress:
- Less developed states need funds to meet basic amenities.
- Forward states can channel resources for industrial growth.
