THIRUVANANTHPUARAM: A dramatic fall in remittances does not mean the end of the road for Kerala. Even a massive swell in remittances since 2011has not helped the state; instead of improving tax revenue, a burgeoning of revenues has paradoxically worsened the revenue mobilisation. What's more, NRK deposits in banks are employed by these banks outside the state where returns are high. In short, the state has long adapted to a low-remittance regime.
It is not as if a part of the non-resident money is not pumped into the economy but it is just that it is not reflected in the tax revenue of the state. "The part of remittances that is being pumped into the market has somehow managed to hoodwink the state's tax radars," said a finance department official. Experts say most of this money goes into construction and gold. Dr Irudaya Rajan, the state's foremost demographic expert, chalks up the ongoing boom in the construction and real estate sectors to NRI money.
"But the investment made in this sector is masked. No one, for instance, ever reveals the actual amount paid to purchase a piece of land. In the case of gold, too, bulk purchases are made without bills," he said. The state, as a result, is deprived of a share of NRI prosperity. The lion's share of NRI money, however, remains in banks. But it is not easy to draw this money out for the state's development.
Firstly, there are functional conditions imposed on banks by the RBI. "The banks have statutory obligations like cash reserve ratio, investment in securities and statutory liquidity ratio for which it keeps apart some of the deposits," Mr Janardhanan, a former banker said. More than 30 per cent of the NRI deposits are locked up in banks to meet their functional obligations.
More importantly, banks in spite of Kochi Metro and Vizhinjam port are still not convinced of the state's investment potential. "Banks get better returns if they employ the cache in development-oriented states like Tamil Nadu or Gujarat or Andhra Pradesh," Dr Irudaya Rajan said.
