Kerala Tightens Purse As Fiscal Pressures Continue To Mount

The Kerala government has directed all departments to exercise strict fiscal discipline while preparing Budget Estimates for the next financial year, citing continued financial pressure on the state's finances. In a circular issued by the Finance Department, government departments have been instructed to avoid increasing expenditure and ensure that revised estimates do not exceed the allocations made in the original Budget. The move reflects the government's effort to manage public finances as fiscal challenges continue despite the change in administration.

The circular advises departments to avoid projects that do not offer tangible economic benefits and postpone repair and maintenance works that can be deferred. Officials have also been asked to prepare realistic salary estimates and provide detailed justification for any expenditure exceeding the previous year's levels. Additionally, non-plan expenditure, excluding salaries, should not surpass last year's spending, while department heads have been directed to critically evaluate all schemes before proposing them for inclusion in the Budget.

The Finance Department has also instructed departments to assess the need for retaining temporary employees and consider redeploying surplus staff to fill vacancies instead of retrenching them. Furthermore, departments have been asked to furnish details of pending tax and non-tax arrears, explain the reasons for outstanding dues, and outline measures being taken to improve recoveries. The directives are aimed at strengthening expenditure management and enhancing the state's revenue collection efforts.

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Although Kerala's revenue receipts increased to ₹33,311.21 crore during the first quarter of the current financial year compared to the corresponding period last year, higher expenditure and increased borrowings have continued to put pressure on the state treasury. The financial constraints are also affecting local self-government institutions. Thiruvananthapuram Corporation Mayor V.V. Rajesh said he had informed Chief Minister V.D. Satheesan about the civic body's financial difficulties, including an estimated shortfall of nearly ₹250 crore following reductions in plan allocations.

The state's fiscal situation has remained a key concern since the new government assumed office in May. One of its first major decisions was the release of a White Paper on Kerala's finances, which highlighted outstanding liabilities exceeding ₹5 lakh crore. The latest expenditure control measures are part of the government's broader strategy to improve fiscal management while balancing development priorities and maintaining essential public services amid persistent financial challenges.

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