Kerala 2005 - of Planning Commission

CHAPTER 10
BY WAY OF CONCLUSION: SUGGESTIONS AND RECOMMENDATIONS
167
Devolution of functions, funds and functionaries is key
to the effective functioning of panchayats. The first two
have been met in some reasonable measure. However,
the inadequacy of functionaries continues to dog the
effective functioning of panchayats, especially at the
village level. Deployment of existing government staff
has been going on at a snail’s pace. The State government
needs to address this problem in a time-bound manner.
The areas that call for further attention are (a) capacity
building in terms of the Panchayat’s ability to design,
formulate and implement projects and programmes, and
(b) administration of functions, accounting and financial
management. The desirability of creating a Panchayat
Administrative Service, as was done in Gujarat some time
ago, warrants serious consideration in view of the fact that
the third tier of government has to be institutionalised to
strengthen the democratic governance of the country.
A sizeable proportion of expenditure that contributed to
the enhancement of basic human development in Kerala
was borne by the State government. Given the public and
‘collective good’ nature of most of these expenditures,
Government budget will continue to be the main source
of expenditure. The need to strengthen potential linkages
between human development and economic growth also
calls for enhanced public expenditure especially in such
critical infrastructure management and development as
power, drinking water, sanitation and so on. All these
point to the crucial role of public revenue. As in the case
of most States in India, the fiscal situation in Kerala is
characterised by continuing deficits. Concerted measures
are, therefore, called for to correct the situation. In the
short term, every effort should be spared to ensure the
full realisation of the revenue potentials. Studies point
out that the extent of unrealised revenue is around
one-third of the potential. This is a significant amount
and would go a long way, if realised, in meeting the
additional demands for resources in strengthening
expenditures in sectors related to human development
as well as infrastructure development. Three sets of
measures are proposed here: (1) Strengthening the
revenue (both tax and non-tax) collection machinery
at the State-level through a package of incentives and
disincentives, estimating the potential revenue through
detailed studies, and plugging the loopholes for evasion;
(2) Strengthening the tax collection machinery at the
panchayat level; and (3) Widening the tax base that
should include the service sector which has emerged as
the leading sector in the Kerala economy. This calls for
consultations with other States as well as the Central
Government since the States do not have the power to
tax services. A more balanced federal financial relation
would also contribute to the capacity of the States to
advance the objective of human development.