The Kerala Fiscal Responsibility Act, 2003

[Translation in English of “2003- ലലെ കകേരള ധനസസംബന്ധമമായ ഉത്തരവമാദദിത്ത ആകക്റ്റ്”
published under the authority of Governor] 
ACT 29 OF 2003
THE KERALA FISCAL RESPONSIBILITY ACT, 2003* 
An Act to provide for the responsibility of the Government to ensure prudence in fiscal
management and fiscal stability by progressive elimination of revenue deficit and
sustainable debt management consistent with fiscal stability, greater transparency
in fiscal operations of the Government and conduct of fiscal policy in a medium
term fiscal frame work and for matters connected therewith or incidental thereto.
Preamble.—WHEREAS it is expedient to provide for the responsibility of the
Government to ensure prudence in fiscal management and fiscal stability by progressive
elimination of revenue deficit and sustainable debit management consistent with fiscal
stability, greater transparency in fiscal operations of the Government and conduct of
fiscal policy in a medium term fiscal frame work and for matters connected therewith
or incidental thereto:
BE it enacted in the Fifty-fourth Year of the Republic of India as follows:—
1. Short title and commencement .—(1) This Act may be called the Kerala Fiscal
Responsibility Act, 2003.
(2) It shall come into force, on such date as the Government may, by
notification in the Gazette, appoint.
2. Definitions.—In this Act, unless the context otherwise requires,—
(a) ‘annual budget’ means the annual financial statement laid before the
Legislative Assembly under article 202 of the Constitution of India; 
(b) ‘committee’ means public expenditure review committee constituted under
sub-section (1) of section 6. 
* Received the assent of the Governor on the 13th day of September,2003 and published in the Kerala 
Extraordinary Gazette No. 1738 dated 17th September, 2003.
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(c) ‘current year’ means the year preceding the year for which the budget and
medium term fiscal policy are being presented.
(d) ‘fiscal deficit’ means the excess of total expenditure of the Government
over  the  total  receipts  and  represents  the  borrowing  requirements,  and  net  of
repayment of debt of the Government during the year, calculated as prescribed by the
Comptroller and Auditor General of India;
(e)  ‘fiscal  indicators’  means  measures  such  as  numerical  ceilings  and
proportions to gross state domestic products as may be prescribed for evaluation of the
fiscal position of the State Government; 
(f) ‘Government’ means Government of Kerala; 
(g) ‘medium term fiscal framework’ means the frame work drawn up by the
Government for a five year period from the financial year on which this Act shall come
into force with the objective of progressively eliminating the Revenue Deficit;
(h) ‘prescribed’ means prescribed by rules under this Act; 
(i) ‘previous year’ means the year preceding the current year;
(j) ‘revenue deficit’ means the difference between revenue expenditure and
revenue  receipts  and  implies  increase  in  the  liabilities  of  the  State  without
corresponding increase in the assets of the State calculated as prescribed by the
Comptroller and Auditor General of India;
(k) ‘State’ means the State of Kerala; 
(l) ‘total liabilities’ means liabilities upon the Consolidated Fund and public
account of the State;
(m) ‘triggers’ means the intra year bench marks on deficit.
3. Fiscal Policy Statement to be laid before the Legislative Assembly .—(1) The
Government shall lay in every financial year before the Legislative Assembly along with
the annual budget, a medium term fiscal policy statement and a fiscal policy strategy
statement.
(2) The medium term fiscal policy statement shall set forth a three year rolling
target for fiscal indicators with specification of underlying assumptions.
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(3) In particular and without prejudice to the provisions contained in sub-
section (2) the medium term fiscal policy statement shall include assessment of
sustainability relating to,—
(a) the balance between revenue receipts and revenue expenditure; 
(b) use of capital receipts including open market borrowing for generating
productive assets.
(4) the fiscal policy strategy statement shall, interalia, contain,—
(a)  policies  of  Government  for the  ensuing  financial year relating  to
taxation, expenditure, borrowings and other liabilities, lending and investment and such
other activities  like underwriting and guarantees which have potential budgetary
implications;
(b) the strategic priorities of the Government for the ensuing financial year
in the fiscal area; 
(c)  evaluation  as  to  how  current  policies  of  the  Government  are  in
conformity with the fiscal management principles as set out in section 4 and the
objectives set out in medium term fiscal policy statement.
4.  Fiscal Management Principles .—(1) The  Government  shall take  appropriate
measures to reduce the revenue deficit and build up an adequate revenue surplus by
following such principles as may be prescribed.
1[(2) In particular and without prejudice to the generality of the foregoing
provision, the Government shall, eliminate the revenue deficit completely during the
period  from 2021-2022 to 2025-2026 and shall; pe
(a) make revenue surplus in the order of 0.5 per cent, 0.8 per cent, 1.2 per
cent, 1.7 per cent and 2.5 per cent of the Gross State Domestic Product in the years of
2021-2022,  2022-2023,  2023-2024,  2024-2025  and  2025-2026  respectively  and  the
targetted loan amount within the limit of fiscal deficit shall be completely spent for
asset development; 
(b) reduce fiscal deficit to 3% of estimated Gross State Domestic Product
within a period of five years commencing from 1st April, 2021 and ending on 31st
1 Substituted by Act 13 of 2022( w.e.f 01-04-2021).
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March, 2026 by maintaining the fiscal deficit at a level not exceeding 4.5 per cent, 4
per cent, 3.5 per cent, 3.5 per cent of the  Gross State Domestic Product in the years
2021-2022, 2022-2023, 2023-2024 and 2024-2025 respectively and reducing it to 3 per
cent in 2025-2026;
Note:—(i) The above upper limit of fiscal deficit is inclusive of 0.5 per cent
capital expenditure linked  borrowing space and an additional borrowing space of 0.5
per cent of  Gross State Domestic Product linked to performance in power sector during
2021-2022 to 2024-2025.
(ii) The State shall be eligible for capital expenditure linked borrowing, if
the State achieves the targeted capital expenditure fixed for the State. In order to
become the State eligible for additional borrowing linked to the performance in power
sector, all the entry level conditions and performance evaluation criteria stipulated for
each year need to be filled.
(iii) If the State is not able to fully utilise its sanctioned borrowing limit
(excluding power sector borrowing), in any particular year during the first four years
of Finance Commission award period (From 2021-2022 to 2024-2025), it will have the
option of availing the unutilised borrowing amount in any of the subsequent years
within the Finance Commission award period.
(c) Reduce the total debt liabilities of the State  in the order of 34.7 per
cent, 34.5 per cent, 33.7 per cent, 32.8 per cent and 32 per cent of the  Gross State
Domestic Product in the years of 2021-2022, 2022-2023, 2023-2024, 2024-2025 and 2025-
2026 respectively.] 
5. Measures for Fiscal Transparency. —(1) The Government shall take suitable
measures to ensure greater transparency in its fiscal operations and minimise as far as
practicable in public interest official secrecy in the preparation of annual budget:
Provided  that  the  Government  shall  have  the  power  to  reserve  any  such
information which would adversely affect the interest of the State Exchequer.
(2) In particular and without prejudice to the generality of the foregoing
provision the Government shall at the time of presentation of annual budget disclose in
such manner as may be prescribed,—
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(a) the significant changes in the accounting standards, policies and practices
affecting or likely to affect the compliance of the prescribed fiscal indicators; 
(b) as far as practicable, all outstanding contractual liabilities, revenue
demand raised, but not realised, committed liability in respect of major works and
supply contracts, losses incurred in providing public goods and services, off budget
borrowings and contingent liabilities created by way of guarantees having potential
budgetary implications. 
6.  Public Expenditure Review Committee .—(1) As soon as may be after the
commencement  of  the  Act,  the  Government  may,  by  notification in  the  Gazette
appointed a Committee to be called ‘Public Expenditure Review Committee’.
(2) The Committee shall consist of not more than five members who are having
expertise in the fields of Finance, Economic Management, Planning, Accounts and Audit
and Law.
(3) The members of the Committee shall be appointed by the Government on
the recommendation of the Selection Committee consisting of Chief Minister, Finance
Minister and the Leader of the Opposition.
(4) The terms and conditions of the members in the Committee shall be such as
may be prescribed.
7. Powers and functions of the Committee .—The Committee shall submit to the
Government in such form and at such intervals as may be prescribed a review report
giving full account of each item where the deviation from the fiscal target have
occurred during the previous year.
8.  Measures to enforce compliance .—(1) The Government shall specify in the
annual budget the contingent measures that it would take to control the increase in
deficit beyond certain specified levels during the coming year. Whenever there is either
shortfall in revenue or excess of expenditure over specified levels during the course of
the year, the Government shall take steps either to make proportionate reduction in the
voted expenditure authorised from the Consolidated Fund or to increase the revenue
and in case such reduction being made it shall be without affecting the amount charged
thereon. Triggers as well as corrective actions that shall be initiated upon activation of
triggers shall also be the integral part of the budget.
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(2) The Finance Minister of the State shall make a statement in the Legislative
Assembly explaining any deviation in meeting the obligation of the Government under
this Act and shall further explain whether the deviation is substantial and relates to
the actual or the potential budgetary outcome and state the remedial measures that the
Government propose to take in this regard.
9.  Power to make rules. —The Government may, by notification in the Gazette,
make rules for the purpose of carrying into effect the provisions of this Act.
(2) Every rules made under this Act shall be laid, as soon as may be after it is
made, before the Legislative Assembly while it is in session for a total period of
fourteen days which may be comprised in one session or in two successive sessions and
if, before the expiry of the session in which it is so laid or the session immediately
following, the Legislative Assembly makes any modification in the rule or decides that
the rule should not be made, the rule shall thereafter have effect only in such modified
form or be of no effect, as the case may be; so however that any such modification or
annulment shall be without prejudice to the validity of anything previously done under
that rule.
10. Protection of action taken in good faith. —No suit, prosecution or other legal
proceeding shall lie against the Government or the Committee or any Officer of the
Government or any member of the Committee for anything which in good faith done or
intended to be done under this Act or the rules made thereunder.
11. Application of other laws not barred .—The provisions of this Act shall be in
additions to and not in derogation of the provisions of any other law for the time
being in force.
12. Removal of difficulties. —(1) If any difficulty arises in giving effect to the
provisions of this Act, the Government may, by order, do anything not inconsistent with
such provisions to remove such difficulty.
(2) No order under sub-section (1) shall be made after the expiration of a
period of two years from the commencement of this Act.
(3) Every order made under this section shall be laid, as soon as may be after
it is made before the Legislative Assembly. 

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