Kerala's high spending on social protection programs has resulted in better child survival rates compared to the US, despite the struggle to increase revenue generation through taxes. The state's per capita GDP is 1.6 times higher than the Indian average, but its tax to GDP ratio is similar to the rest of the country, leading to financial challenges. Kerala's high social protection levels are juxtaposed with lower tax revenues, causing financial instability. The state blames the central government for exacerbating its financial problems with the imposition of the net borrowing ceiling rule, limiting its borrowing capacity to 3% of the state's GDP.
In today’s Finshots, we explain how the state ended up in a spot of bother and why it is unhappy with the central government.
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