Why is Kerala Falling Into an ECONOMIC crisis? Why did Supreme Court intervene? Explained in Detail

Summary

The state of Kerala, India, known for its high development and literacy, is facing an unprecedented financial crisis, likened to Sri Lanka's economic turmoil. With a staggering debt of ₹1.11 lakh crores, Kerala struggles to pay salaries and pensions, affecting over 3.5 lakh government employees and 55 lakh social security beneficiaries. The crisis stems from excessive short-term spending, inefficient tax collection, and off-budget borrowings, exacerbated by reduced shares from the central divisible pool of taxes. Kerala's finance minister appeals for central assistance, while the video underscores the importance of understanding state finances and economic indicators for responsible citizenship.

Takeaways

• 🔴 Kerala is facing a severe financial crisis, with difficulties in paying salaries and managing state expenses, leading to a situation comparable to economic crises in other regions.
• 🛠 The Kerala government has accrued a significant debt, amounting to over 1 lakh crore, prompting the Finance Minister to seek assistance from the Union Finance Minister.
• 💸 Kerala's financial woes are partly attributed to using borrowed funds for day-to-day expenses, including salaries and pensions, leading to delayed payments and suspended social security schemes.
• 🖥 Previous warnings about economic challenges facing Indian states, highlighted in a 2022 RBI case study, underscore the importance of paying attention to state finances.
• 🛡 Kerala's financial strategy is criticized for excessive short-term spending and insufficient investment in long-term infrastructure, contributing to its debt issues.
• 📈 The state's revenue collection has significantly declined post-GST, exacerbating its financial instability.
• 💰 Kerala receives a substantial revenue deficit grant from the central government, challenging the notion of unfair treatment by the Centre.
• 💵 The allocation of taxes from the central divisible pool to states, which has decreased for Kerala, is a point of contention, highlighting disparities in financial distribution.
• 📊 Off-budget borrowings have played a role in Kerala's financial predicament, with recent changes in accounting for these borrowings affecting the state's fiscal health.
• 💳 The situation in Kerala underscores the need for citizens to be informed about economic indicators and government spending to prevent similar crises.

Q & A

What is the current financial situation of Kerala?

Kerala is facing a severe financial crisis, with the state being on the verge of bankruptcy. It has accumulated a loss of 1, lakh 110,000 crores and is struggling to pay salaries and pensions, using borrowed funds to cover state expenses.

How has Kerala's economic crisis impacted its employees?

The salaries of 3.5 lakh government employees have been delayed, and those who received their salaries are unable to withdraw the entire amount. Additionally, social security schemes for 55 lakh people have been put on hold.

What is the role of the Net Borrowing Ceiling (NBC) in Kerala's financial situation?

The NBC is a limit imposed by the central government on states, restricting how much they can borrow in a financial year. For Kerala, the NBC for FY 2023-24 stands at 3,244 crores, but due to excessive borrowing in previous years, the center has cut 3,140 crores from Kerala's share, leading to a total borrowing limit of 2,932 crores for the year.

Why is Kerala's financial crisis relevant to citizens?

The financial crisis in Kerala serves as a cautionary tale for citizens to pay attention to their state's finances. Understanding the economic health of a state is crucial for citizens to make informed decisions and to hold their governments accountable for fiscal responsibility.

What are the key economic indicators used to assess a state's financial health?

Key economic indicators include capital outlay as a percentage of net expenditure, committed expenditure as a percentage of revenue receipts, interest payments to revenue receipts, and the balance between short-term expenses and long-term investments.

How has Kerala's spendthrift nature contributed to its economic crisis?

Kerala has spent more on short-term expenses rather than long-term investments, leading to increased spending without a corresponding increase in income. This has resulted in high committed expenditure and interest payments, contributing to the state's financial difficulties.

What is the issue with Kerala's tax collection efficiency?

Kerala's tax collection efficiency has declined, with the state collecting less revenue per 100 rupees of state income post-GST implementation and during the COVID-19 pandemic. Inefficient tax collection has led to reduced revenue and increased reliance on borrowing.

What is the divisible pool of taxes and how does it affect Kerala's funding?

The divisible pool of taxes refers to a portion of the total tax revenue collected by the central government that is eligible for distribution among states. Kerala argues that its share in this pool has decreased significantly, leading to a shortfall in funds.

How has the inclusion of off-budget borrowing affected Kerala's debt situation?

Off-budget borrowing, where public sector units raise funds on behalf of the state, has contributed to Kerala's high debt levels. Although this debt does not officially increase the state's borrowing limit, it is indirectly the government's responsibility and can lead to uncontrollable debt growth.

What lessons can be learned from Kerala's economic crisis?

The crisis highlights the importance of fiscal responsibility, the need for efficient tax collection, and the dangers of off-budget borrowing. It also underscores the role of citizens in monitoring their state's economic health and holding governments accountable.

What is the central government's response to Kerala's request for financial assistance?

The central government has pointed out Kerala's financial mismanagement and has cut the state's borrowing limit based on past excessive borrowing. The central government also argues that Kerala is one of the most financially unhealthy states in India due to its high committed expenditure and interest payments.

Outlines

00:00

😟 Kerala's Financial Crisis Overview

Kerala, known as 'God's own country' and one of India's most developed states, is facing a severe financial crisis, akin to Sri Lanka's economic turmoil. The state has accumulated a staggering debt of 1.1 lakh crore INR, leading to difficulties in managing basic expenses such as salaries for 3.5 lakh government employees, pension payments, and social security schemes for 55 lakh individuals. Kerala's Finance Minister has reached out to the Union Finance Minister, highlighting the dire situation and seeking federal assistance. The crisis is a result of excessive borrowing, with the state now using loans to cover basic expenditures. A case study from the RBI had previously flagged such economic problems, emphasizing the importance of fiscal prudence for states. The situation underscores the need for citizens to understand and engage with the financial management of their states to prevent similar crises.

05:00

🔍 Analysis of Kerala's Economic Decline

The financial debacle in Kerala is attributed to several key factors, including mismanagement and inefficient fiscal strategies. The state's capital outlay, which is crucial for long-term returns through infrastructure investment, is significantly lower compared to other states. Kerala's committed expenditure, primarily on government salaries, pensions, and interest payments, is alarmingly high, limiting funds available for development and welfare projects. Additionally, Kerala has the highest interest payments as a percentage of its revenue, indicating excessive reliance on borrowing. Despite receiving substantial grants from the central government, Kerala's revenue collection efficiency has plummeted post-GST, exacerbating the fiscal shortfall. These factors, coupled with political disputes over financial management with the central government, have led to Kerala's current economic predicament.

10:02

📉 Factors Behind Kerala's Financial Unhealthiness

Kerala's financial struggles are also deepened by its high off-budget borrowings, which, although not reflected in the state's official accounts, significantly contribute to its debt. This practice has been criticized and curtailed by the central government, impacting Kerala's budget and borrowing capabilities. Kerala argues that recent changes in the finance commission's allocation formula, which now emphasizes more recent population data, unfairly penalize the state for its effective population control measures, reducing its share of the divisible pool of taxes. This, along with grievances regarding the allocation and management of off-budget borrowings, highlights the complexity of federal-state financial relations and the challenges in managing public finance in a diverse and populous country like India.

15:04

📚 Lessons from Kerala's Economic Crisis

The economic crisis in Kerala serves as a critical lesson on the importance of fiscal responsibility and the need for citizens to be aware of their government's financial management. It demonstrates the dangers of spending beyond means, particularly through off-budget borrowings, and the long-term impact such practices can have on a state's financial health. The situation in Kerala emphasizes the need for transparent and prudent financial planning and the role of informed citizenry in holding governments accountable. Moreover, it suggests that economic indicators should be a primary lens through which government performance is evaluated, beyond the usual political rhetoric. Finally, it calls for a balanced approach to fiscal management, where both investment in long-term development and careful borrowing are harmonized.

Keywords

💡Financial Crisis

A financial crisis refers to a situation where a government, organization, or individual faces extreme difficulty in meeting their financial commitments, often leading to insolvency. In the context of the video, Kerala is facing a financial crisis due to its inability to pay salaries and pensions, and its reliance on borrowed funds to cover state expenses. This crisis is characterized by a significant fiscal deficit and a lack of funds for essential services.

💡Kerala Government

The Kerala Government refers to the ruling body of the Indian state of Kerala, responsible for governing the state and managing its resources. In the video, the Kerala Government is depicted as struggling with a financial crisis, unable to meet its financial obligations to its employees and pensioners, and seeking assistance from the central government.

💡Net Borrowing Ceiling (NBC)

The Net Borrowing Ceiling (NBC) is a financial limit imposed by the central government on states, restricting how much they can borrow in a financial year. This limit is determined by the Finance Commission and is calculated as a percentage of the state's GDP. The NBC is a crucial mechanism for fiscal discipline, ensuring that states do not take on unsustainable levels of debt.

💡Fiscal Deficit

A fiscal deficit occurs when a government's expenditures exceed its revenues, resulting in the need to borrow money to cover the shortfall. This is often seen as a measure of a government's financial health and sustainability. In the video, Kerala's high fiscal deficit is indicative of its economic crisis, as it struggles to meet its financial obligations without incurring further debt.

💡Committed Expenditure

Committed expenditure refers to the mandatory spending that a government must undertake, typically including salaries, pensions, and interest payments on debt. A high level of committed expenditure can indicate fiscal strain, as it leaves less flexibility for the government to invest in infrastructure or other areas that could stimulate economic growth.

💡Interest Payments

Interest payments are the costs associated with servicing a government's debt. A high percentage of revenue spent on interest payments can signal financial distress, as it indicates that a significant portion of the government's income is being used to pay off existing debts rather than being invested in the state's future growth.

💡Revenue Deficit Grant

A Revenue Deficit Grant is financial assistance provided by the central government to states to help them bridge the gap between their revenue and expenditure. This grant is intended to support states in managing their budgets and maintaining fiscal stability.

💡Tax Collection

Tax collection refers to the process by which a government gathers taxes from its citizens and businesses. Efficient tax collection is crucial for a state's financial health, as it provides the necessary revenue to fund public services and infrastructure. Inefficient tax collection can lead to a shortfall in government revenue, which may necessitate borrowing or cutting back on services.

💡Divisible Pool of Taxes

The divisible pool of taxes is the portion of total tax revenue collected by the central government that is eligible to be shared among the central government and its states. The distribution of this pool is determined by the Finance Commission based on various factors, including population size, income, and tax collection efficiency.

💡Off-Budget Borrowings

Off-budget borrowings are debts incurred by a government through public sector units or other entities, which do not appear as direct borrowings on the government's balance sheet. These borrowings can circumvent the imposed borrowing limits and lead to uncontrollable debt growth if not properly regulated.

💡Economic Indicators

Economic indicators are quantifiable measures that provide insights into the economic performance and health of a region or country. They include metrics like GDP growth, unemployment rates, and inflation, and are used by governments, businesses, and economists to make informed decisions. In the video, the economic indicators of Kerala, such as capital outlay, committed expenditure, and interest payments, are analyzed to understand the state's financial crisis.

Highlights

Kerala is facing a severe financial crisis, on the verge of bankruptcy with a loss of 1,110,000 crores.

Kerala's financial situation is compared to that of Sri Lanka, with daily headlines about the financial crisis.

Kerala government is using borrowed funds to pay for state expenses, including salaries and pensions.

Salaries of 3.5 lakh government employees are delayed, and some cannot withdraw their entire salary amount.

Social Security schemes for 55 lakh people have been put on hold due to the financial crisis.

Kerala's Finance Minister has written to the Union Finance Minister about the state's grave financial situation.

The state's net borrowing ceiling for 2023-24 is 32,442 crores, but due to over-borrowing in previous years, the center has cut 3,140 crores.

Kerala was allowed to borrow 75% of 29,320 crores in the first 9 months of the financial year but exhausted this amount within the first 6 months.

Kerala's capital outlay as a percentage of net expenditure is significantly lower compared to other states, indicating a lack of investment in infrastructure.

Kerala's committed expenditure, mainly on salaries, pensions, and interest payments, is much higher than other states.

Kerala spent almost 20% of its revenue on interest payments for loans, a concerning figure compared to other states.

Kerala's fiscal deficit and revenue deficit are higher than other states, indicating poor financial management.

Kerala received 53,137 crores in Revenue deficit Grant from the central government, one of the highest in the country.

Kerala's tax collection efficiency has declined, with a drop from 12.4 rupees per 100 rupees of state income to 6.9 rupees post-GST and COVID.

Kerala argues that its share from the divisible pool of taxes has decreased significantly from earlier decades.

The 15th Finance Commission's criteria for distributing revenue among states have changed, affecting Kerala's share.

Kerala had one of the highest off-budget borrowings in the country, which is now being scrutinized by the center.

The central government has decided to include off-budget borrowings in the state's account as debt, affecting Kerala's budget allocation.

Lessons from Kerala's crisis include the importance of economic indicators, responsible spending, and informed citizen vigilance on government finances.

Transcripts

hi everybody the state of Kerala is

nearly bankrupt now the Kerala

government has been citing a lot of

financial crisis you would recall in the

state the state is now facing

difficulties when it comes to paying

salaries Kerala has run up a loss of 1

lakh 110,000 crores because Kerala is on

the verge of bankruptcy in a shocking

update a state that is known to be the

most developed and literal state of

India the state that is called as the

God's own country it is now facing an

economic crisis just like Sri Lanka you

open the newspapers in Kerala and every

day the headlines invariably on the

front page is about financial crisis

Kerala government seems to be in

financial crisis Kera Finance Minister K

balagopal has written to Union Finance

Minister nirmala sitaraman on the grave

financial crisis facing the state Kerala

is using borrowed funds to pay off the

state's expenses they don't have money

for pensions for salaries and it's

spending for months together that's the

state of Kerala as of last week salaries

of 3.5 LH government employees are

delayed the ones who got their salary

are not able to withdraw the entire

amount Social Security schemes of 55

lakh people have been put on hold and

now the state of Kerala is asking the

center to bail it out and if you're

wondering why politics and economics are

so important for you as a citizen I got

to tell you that in our case study of

2022 we presented a case study from the

rbi's research and this case study

clearly alerted everyone about this

ongoing econom iic problem in some

states of India and like I said in 2022

even today if you don't pay attention to

your State's finances your state will be

in the same condition as Kerala so if

you want to be a sharp citizen of

Economics or just a sensible citizen you

need to understand how did Kerala fall

into an economic crisis in spite of

being so educated and development

focused why couldn't the leaders of Cara

save the state from this crisis and most

importantly as citizens of India you

need to know the lessons that every

state needs to learn from the fall of

Kerala before we move on I want to

quickly thank the 1 person club for

supporting our content people as the new

Financial year is about to begin most of

you will be expecting your appraisals

right and it is extremely important that

you manage your money better and take

control of your finances and just like

we take resolutions to transform our

lives every New Year's Eve this new

Financial year you need to take the

resolution to take control of your

finances and this is where 1 person Club

is here to help you out this company is

founded by my dear friend Sharon heg

also known as Finance with sharan the

one person Club is India's biggest

Finance Community with almost 50,000

members so if you want to learn about

early retirement planning tax planning

and insurance planning and if you want

to start your financial resolution your

first step must be to attend Sharon's

personal finance masterclass this 2-hour

master class is attended by more than 2

lakh individuals and has a rating of

4.8 in this master class Sharon will

teach you everything about personal

finance and he will help you take

control of your financial Independence

and only for think school learners there

is an exclusive discount of 50% on the

master class so if this sounds useful to

you join the master class using the link

in the

description to understand this fight

between the state and the center we need

to understand something called the net

borrowing ceiling or

NBC in very simple terms this is a limit

that is imposed on the states by the

Cent Cal government which puts a limit

on how much they can borrow in a

financial year this is decided by the

15th Finance commission and it has been

fixed at 3% of the state's GDP for fi23

and 24 so if Maharashtra has a gsdp of 1

trillion rupees then they can borrow or

take a debt of 3% of this 1 trillion

that is 30 billion rupees if this is

clear to you let us try to understand

why is the center not allowing Kerala to

borrow more you see for the fiscal year

of 2023 24 the net borrowing ceiling for

the state of Kerala stands at

32,44 cror but in the last few years

Kerala has borrowed

3,140 crores extra so this year the

center has cut this 3,140 crores from

kerala's share of

32442 cror this year so in total Kerala

could borrow

29,32 cror this year according to the

NBC limits of fi23 and 24 now another

rule says that a state can borrow 70 %

of the total NBC limit within the first

9 months of a financial year so Kerala

was allowed to borrow 75% of

29,32 CR that is

2,852 crores for the first 9 months of

its Financial year but somehow Kerala

has exhausted this amount within the

first 6 months of the financial year

itself so now they need another 15,000

crores more than the NBC limit to run

the state for the rest of the year and

this is where the tussle between the

state and the center started state of

Kerala where a r between the Kerala

government and the center has rupted

over financial crisis in the state

Kerala government seems to be in

financial crisis and they are blaming

central government for this are facing a

lot of uh Decisions by the union

government which ex uses our financial

resources there is a serious crunches

there on the other hand the center told

Supreme Court that Kerala is one of the

most financially unhealthy States Kerala

today with pin Vis sitting in jant man

in Delhi is the most badly economically

mismanaged state in in the country so

now the question over here is how did

Kerala suddenly fall into such a big

debt trap and what is the way forward

well the first reason for kerala's

downfall is its spendthrift in the wrong

direction how do we know this well we

looked at the economic indicators of

Kerala now pay very close attention to

this because you can use the same

framework to understand how your state

is managing its finances so firstly when

it comes to Kerala we looked at the

capital outlay as a percentage of of its

net expenditure as in how much money did

Kerala spend into building

infrastructure and Roads as compared to

its entire expenditure now why is it

important because 100 rupees invested in

capital outlay can give you a return of

250 rupees in the long run so while

Maharashtra spent 13.4% of its expense

into Capital outlay Tamil Nadu spent

12.14 and Kerala only spent

88.2% similarly the next variable to

check is its committed expenditure as a

percentage of Revenue receips in simple

words if you make one lakhs a month and

you have a compulsory expenditure of

20,000 rupees on rent 10,000 rupes on

groceries and 10,000 rupees in utilities

then your committed expenditure is

40,000 rupees right so just like that

committed expenditure in the context of

a state is the compulsory budget that

the government has to spend out of its

expenditure so just like this in the

context of a state committed expenditure

is the compulsory expense that the

government has to make out of its

Revenue this is usually on government

salaries pensions and interest payments

so if this committed expenditure is less

then it means that the state is

performing well why because if the

government has money left in its account

then it can use these savings into

building better infrastructure or it can

spend on welfare of the people so in

this variable while Tamil Nadu stands at

64% Maharashtra stood at 56% Gujarat

stood at 46% whereas Kerala stood at 70%

in fact in 2021 while other states had

an average committed expense of

54.9% of the revenue for Kerala it stood

at 82% so in the context of personal

finance it's like saying your salary is

1 lakh rupees and 70,000 of this money

is going into groceries rent and

utilities whereas your friends are only

spending 55,000 rupees this is the

status of Kerala with the second

economic indicator then the next

variable to check is interest payments

to revenue receipts as in how much of

the government's expense is spent on

interest payments for loans it's like if

your salary is 2 lakh rupees and you

spend 1.5 lakhs only on paying interest

for your home loan then it is obviously

bad right so more this interest payments

the worse it is for the state now if you

look at kerala's performance in 20 2122

while other states spent 13.38% of their

revenue into interest payments Kerala

spent

19.98% which is almost 20% of its

Revenue into just interest payments and

today if we compare interest payments to

revenue receipts of Kerala while Kerala

stands at 19% Maharashtra spent only 11%

Tamil Nadu spent 20% Karnataka spent 14%

And Gujarat spent only 14% so again

Kerala and Tamil Nadu are the biggest

Spenders on interest and as you can see

in this chart it was not only greater

than other states but it is even more

than the finance commission Target of

10% and lastly as you can see in this

chart both the fiscal deficit and the

revenue deficit is higher for Kerala

than for other states so clearly from

this entire analysis we could could see

that Kerala has spent more money into

short-term expenses rather than

long-term Investments and this has led

them to spend a lot more money without

an increase in income this is the first

problem with Kerala now some people

might make it political and say that you

know what bro the center must have

discriminated against Kerala so just so

you know Kerala is a recipient of 53,1

37 crores worth of Revenue deficit Grant

from the central government as

recommended by the 15th Finance

commission from 2020 to 2025 and this is

one of the highest in the entire country

so the question over here is in spite of

so much Grant suddenly how did Kerala

find itself in an economic crisis well

this is where we started digging even

further and here's where we found the

second major reason to be inefficient

tax collection so while Kerala

government collected 12.4 rupees per 100

rupee of state income from 1975 to 1986

after GST it declined to an extent where

it touched 8.2 rupees after 2018 and

further decrease to 6.9 rupees during

the covid year and during the same time

Kerala lost 25,000 crores because they

could not follow the new igst regime and

they could not Implement GST system

quickly so again the state government

was left with no choice but to take on

more debt these are the reasons why the

central government is calling Kerala as

financially the most unhealthy state in

India now the question is what is

kerala's justification for all this

because if so much allegations are being

put on Kerala then the state must have

something to say right well as it turns

out they do kerala's Finance Minister

argues that kerala's share has been

declining from something called the

divisible pool of taxes and this is

something that makes a lot of sense so

understand this carefully the divisible

pool of taxes refers to a specific

portion of the total tax revenue

collected by the central government

which is eligible to be shared between

the central government and its states

and if you look at this chart it usually

ranges between 30% to 40% for example

let let's Imagine India collected 1,000

crores in taxes in fi23 and 24 and let's

say 35.1% of this amount would be

distributed among the states so the

total divisible pool is 351 crores and

according to the 15th Finance commission

this 351 crores must be distributed

among the states according to this table

so according to this table Kerala will

get 1.92% that is 6.7 crores Maharashtra

will get 6.3% that is 22.1 crores

Karnataka will get 3.6% and so on and so

forth so Kerala over here argues that in

the 1990s Kerala was allocated

3.85% of this divisible pool but fast

forward to the 15th Finance commission

this share is almost halfed to

1.92% and this is the reason why Kerala

is facing a shortage of funds so this

breaks the question why is Kerala given

less share in this divisible pool and

how is the share decided in the first

place well this is done by the finance

Commission of India and they decide how

to split the revenue between states

based on income population size of the

state area and even tax collection of

the states as compared to each other if

this is clear let's understand why did

the 15th Finance commission distribute

money to the states differently if you

look at this chart with the 14th Finance

commission they give 17.5% weightage to

the 1971 population the 15th Finance

commission has changed it to zero and

just like this the weightage has been

changed for multiple parameters as seen

on the screen so the problem over here

that Kerala points out is that if the

finance commission is giving more

weightage to the 2011 data then

obviously it will get less money because

Kerala has less population and they

worked very hard to keep the population

in control so they say that if the

revenue of the state has been decreased

because of they controlling the

population then clearly Kerala is being

penalized by the center for controlling

the population so this way Kerala says

that they're receiving less taxes than

their fair share and lastly Kerala has a

problem with something called the

inclusion of off budget borrowing now I

know this sounds very very complex but

if you're listening to something complex

at think school all you need to

understand is a simple story so here it

goes imagine the government wants to

build a new Railway line which is a very

expensive project let's say this costs

10,000 crores now the government has

already reached its borrowing limit of

30,000 crores and now the center tells

them that they cannot borrow more money

so now what will the state do will it

keep quiet no as it turns out the

government could use a public sector

unit and then raise money so let's call

this PSU as National Rail infrastructure

limited so now the national rail

infrastructure limited goes ahead and

borrows money either from Banks or

through bonds now this money is not

shown as Borrowed by the government so

it doesn't officially increase the debt

of the state government but the catch

over here is that while paying back the

debt the government itself promises to

pay back this loan using its future

budget this means indirectly the

government is responsible for the debt

right but the hack over here is that it

won't appear in the government's budget

as direct borrowings this is the reason

why it's called off budget borrowings

okay so even though on paper the state

is not borrowing Beyond 30,000 crores in

reality in this case it has used a PSU

to borrow another 10,000 crores if this

is clear let's come back to our story

Kerala had one of the highest off budget

borrowings in the country if you look at

this chart while Kerala has 22% of its

off budget borrowings as a percentage of

the total borrowings Maharashtra and

Gujarat had almost zero off budget

borrowings and similarly as you can see

on the screen for sikim and Telangana

even they have very high off budget

borrowings so this is very dangerous

right because even though the debt is

not reflected in the state's account it

can grow uncontrollably through the PSU

borings because there isn't an NBC limit

on it well guess what this is the reason

why in March 2022 the center came up and

said listen guys both your borrowings

from the state as well as the off budget

borrowings will be considered in your

State's account as debt only so you

cannot hide this debt using the

instrument of off budget borings so now

if a state borrowed 1,000 crores extra

on top of their NBC limits then next

year they would get 1,000 crores less

from the center so suddenly the states

that had more off budget borrowings they

were in trouble and one of these states

is Kerala which suddenly got trapped

because their budget started to get cut

and Kerala argues that this move is not

fair and this does make sense because if

you want to rectify a problem in an

economy which is as complex as India you

cannot give a kneejerk reaction you have

to rectify this problem slowly and

steadily this is the reason why Kerala

got stuck in its debt trap and now they

need another 15,000 crores and this

brings us to the last part of the

episode and that are the lessons that we

need to learn from kerala's economic

crisis lesson number one people more

than the Hindu Muslim propaganda and all

the ridiculous things that go on in the

mainstream media it is important for has

to cut through this chaos and learn to

judge the government on the basis of

economic indicators so a kind request to

you is go and check as to how your state

is handling its finances because that's

where the real trouble will come number

two whether you are the king of Dubai

the state of Kerala or an ordinary

citizen spending beyond your means is

going to cost you very heavily in the

future in this case we saw this with

off-budget borrowings and lastly

whenever an economic crisis happens in

any state or any country for that matter

it is extremely important for us the

educated citizens to study the cause and

the effects of these crisis such that we

can keep an eye on our government so

that we don't make the same mistake and

I just hope I give you a perspective to

look at your State's economics using all

the concepts in this case study that's

all from my side for today guys if you

learn something viable please make sure

to hit the like button in order to make

you baba happy and for more such

insightful business and political case

studies please subscribe to our Channel

and don't forget to attend sharan's

personal finance Master Class using the

link in the description thank you so

much for watching I will see you in the

next one

[Music]

[Music]

bye-bye