Kerala Headed For Greek Model of Development, To Borrow $3.6 Billion to Meet Development Needs

Kerala Government is preparing to borrow an unprecedented $3.6 billion for development activities, this takes the state’s total debt to $24.3 billion. Yes, you read it right these figures are in US dollars and billion with a “b”.

This borrowing target is above the $306 million the government plans to raise through government bonds to pay advance salaries and bonuses for government employees before Onam.

John Mundakkayam of Manorama Online reports:

The government has to identify potential lenders and pitch the state’s development activities before them as the initial steps to borrowing. The government has to find a financial consultant through a global tender to do the work for it. Eight prominent institutions have applied to be considered as the state’s consultancy. They have to be tested for their pre-bid eligibility.

The consultant would be charged with the responsibility to identify the companies and monetary agencies who could lend to Kerala. The consultant would then have to convince the companies and agencies of the state’s development plans before they open up their purses. They have to be presented with the chances of success of the projects to be taken up and the means by which the government plans to repay them.

As a preliminary measure, the state would have to issue government-guaranteed bonds and conditional revenue bonds. The government has already approved the issuance of these bonds. The government could not divert a single paise from the borrowed money meant for specific development works. The entire money has to be spent on the works approved by the lenders.

Does the last paragraph sound a bit… Greek? How is the state going to pay back the loan? Through taxes, tolls and fees. Regardless of who comes to power, UDF or LDF, we will have to borrow more because the state is not generating enough revenue to pay for governance and development works. Greek’s total debt is $400 billion, Kerala as a state has already crossed $24 billion. If we don’t do anything now, this amount will get much bigger each year.

Here is a video to help you understand how Greece got into it’s mess:

The sad part is, without an industry of its own and dwindling agriculture sector, Kerala will be passing on this debt to the next generation. Don’t think you can get away without paying, the lenders will make sure you pay every toll, tax and fees. Government jobs too will be slashed, leading to more unemployment.

Do we need to go this way? It’s time to ask some tough questions to those in government, especially what their idea of development is.

Photograph by Simm (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

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