Sp Issue on 16th finance commission-(wl-6670)-Fiscal Stress in Kerala? Beyond Off-budget and Contingent Liabilities

Fiscal federalism has been evolving and created uneven challenges across the states; however, the state of Kerala is facing the dual challenge of getting adequate resources through its own sources of revenue coupled with the change in the central tax share as a part of fiscal devolution it receives. The emergence of off-budget and increasing contingent liability are the state’s response to the above fiscal situation, and these liabilities have significantly changed from 2018 onwards. Accounting and data reporting are significant concerns of these liabilities, which raises the question of transparency and the readiness of information. While examining the state’s fiscal situation, a closer look into the balance sheets of the companies engaged in these liabilities is necessary; therefore, the study highlights the concern of the prudence of the borrowing strategies rather than the rising debt alone. As the unavailability of disaggregated data hinders a more empirical exercise, study proposed a framework (policy toolkit) for analysing those unreported risks that might change the state’s fiscal situation.