Recent Fiscal

Fiscal is a type of policy that is contrasted with monetary policy. The tax and policies the government spends to influence the economical conditions of the state, especially macroeconomic conditions. Macroeconomic conditions include combined demand for inflation, the demand for services and goods, and economic growth. The fiscal year is known as a period of one year that the government uses for financial budgeting and reporting.

Recent Fiscal of Kerala

Overview of Kerala Economy Recently

Even though Kerala faced a massive flood in the year 2018-19, the economic growth of Kerala is very impressive. Again the state faced flooding in 2019-20 but the economic growth was better this year too. But the lockdown during 2020-21 due to the covid – 19 pandemic caused a huge decline in the state finance that is it hit the state finance adversely mainly at the first lockdown phase. In 2020-21 Kerala’s economy faced a GSDP loss of Rs. 156041 crore. By the end of 2020-21 after lifting the restrictions for the covid – 19 pandemic, the economy regained growth momentum. Recent Fiscal Performance (2019-2020)

In the recent fiscal performance (2019-2020), The RD and FD were 1.7% in the year 2019 and 2.79% in the year 2020 against 2.21% in the year 2018 and 3.14 % in the year 2019. The FD was 3% less than the budget level. According to the Fiscal Responsibility Act 2003, as revised in the year 2018, RD is to be maintained at 0 and FD at 3% but the actual RD and FD before amended were 1.7% and 2.79% individually. The State’s Own Tax Revenue recorded a negative growth rate of 0.63% and Central Transfers recorded a negative growth rate of 9.17%. A negative growth rate of 5.07% is posted by revenue expenditure, on the expenditure side. Mainly in Non-SPI (Salary, Pension, and Interest) items, the expenditure was reduced. 

Classification of Fiscal Policy

Classification of fiscal policy is as follows – 

Fiscal Neutral Policy 

The fiscal neutral policy is the first type of fiscal policy. This policy is said to be neutral when the tax revenue spent in relaxation by the government is stable over time. It is a place where enough taxation is paid for expenditure by the government. In the case of neutral fiscal policy, it is complicated to say what will be the amount of tax brought in from one year to the next year. 

Contractionary Fiscal Policy 

Contractionary Fiscal Policy may be used by the government to give a gap or break on an expanding economy. This is used especially when rising inflammation is bothering. When the government collects more taxes than it spends is known as contractionary fiscal policy. Contractionary fiscal policy either aims to reduce inflammation or reduce government debt. When government spending is less and there is an increase in taxes, this type of fiscal policy is generally implemented during the economic slowdown and is known as “austerity policy” and helps the government to save money.

Expansionary Fiscal Policy

Expansionary Fiscal policy is used to promote economic growth. In an expansionary fiscal policy, the government collects less through taxes and spends more. It may cause both increases in spending and reduction of taxes. The tax is reduced in this policy because the government wants the consumers to have more money in their hands so that they can spend and as a result, it will enhance economic growth.

Conclusion

It is to conclude that as Kerala’s economy is highly dependent on contract-based services, it is vulnerable. Now the economic growth of Kerala is dependent on the further covid situations.