Sustainable Consolidation: Suggesting the Way Ahead for Kerala

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.