How Keralam can overcome its legacy infrastructure deficit

Keralam has been universally hailed for its social sector investment and achievements. In contrast, the infrastructure of the State has woefully been lagging behind. This backwardness is a major impediment to industrial investment in the State. The public investment in infrastructure has been inadequate. Even during the current year, after substantial raise in the capital expenditure in the revised Budget of the UDF government, the capital expenditure to GSDP ratio of the State is only 1.34% whereas the all-State average would be nearly 3%.

This wide gap in capital expenditure between Keralam and other States has been persisting over the past five decades. Overcoming the consequent infrastructure deficit is a key challenge to Kerala’s development. The accumulated gap cannot be overcome within a reasonable time frame by budgetary resources alone. However much the current UDF government makes an effort in this direction, they are not going to succeed if they remain faithful to their ‘Indira Guarantees.’

Imbalance of federal system

My major quarrel with the expert committee that looked into the Kerala Infrastructure Investment Fund Board (KIIFB) is that it seems to totally ignore the above vital issue. For me, finance is a tool to pursue the societal development goal, pushing the federal system’s constraints to the limits possible. The committee exhibits no concern for the severe imbalance of the Indian federal system and the imperative need for a State like Keralam, which pursues a different development paradigm, to manoeuvre within the federal system to take forward its project.

May I quote from the last Budget (2011-12) at the end of my first term as a Finance Minister: “Let me place before you an alternative approach to get over the stubbornness of the Central Government in adhering to the tenets of a conservative fiscal policy. Instead of the Government borrowing directly, autonomous Boards or Companies controlled by the Government should raise loans and restore the road network. The Road Fund Board and the Roads and Bridges Corporation would carry out this responsibility…….