Question

Which of the following statements about Kerala's government expenditure composition are correct?

(1) Salaries, pensions and interest payments consume a major share of expenditure.

(2) Capital expenditure consistently dominates over revenue expenditure.

(3) High committed expenditure constrains fiscal flexibility.

• A. (1) and (2) only
• B. (2) and (3) only
• C. (1) and (3) only
• D. (1), (2) and (3)

Answer 1

Answer:

C. (1) and (3) only

(1) Salaries, pensions and interest payments consume a major share of expenditure.

• Correct. These three components are collectively known as committed expenditure. Data consistently shows that in Kerala, committed expenditure accounts for a very high proportion of the state's total revenue expenditure (e.g., around 65% to 70% of total revenue receipts in recent budget estimates). This burden is significantly high compared to many other major states.

(2) Capital expenditure consistently dominates over revenue expenditure.

• Incorrect. Kerala, like most states in India, has revenue expenditure significantly dominating capital expenditure. Revenue expenditure is related to routine functioning, while capital expenditure creates assets. For example, in the 2025-26 Budget Estimates, Kerala's Revenue Expenditure was proposed at approximately ₹1,79,476 crore, while Capital Outlay (a key part of capital expenditure) was only approximately ₹16,938 crore. This clearly shows revenue expenditure is much larger, and not dominated by, capital expenditure.

(3) High committed expenditure constrains fiscal flexibility.

• Correct. A high committed expenditure (salaries, pensions, and interest payments) is mandatory and leaves the state government with a limited discretionary financial space to spend on developmental activities, new schemes, or increasing capital expenditure. Therefore, it severely constrains fiscal flexibility.