No populist measure as Kerala budget focusses on infra push
In the state’s annual statement, the fiscal deficit as percentage of GSDP has been pegged at 3.16% in FY 2025-26, down from 3.51% the previous financial year
Kerala finance minister KN Balagopal presented the financial outlay of the state for FY 2025-26 on Friday, seeking to mop up revenue mobilising measures through tax hikes on land and vehicles, push the accelerator on building infrastructure and steering clear of populist measures ahead of local body elections this year and the assembly polls next year.
In an address that lasted over two-and-a-half hours, Balagopal, presenting the last full budget of the second Pinarayi Vijayan-led LDF government, painted the picture of a state that has “overcome the trying times of severe fiscal constraints” and attributed the failure to pay DA arrears to state government employees and pensioners in the past to the curtailment of the state’s borrowing limits and the reduction in the divisible pool of taxes.
Yet, despite the claimed improvement in the fiscal health, the finance minister shied away from increasing the social welfare pensions, currently disbursed to around 6 million people, and constituting a wage revision committee for the state government employees despite being an election year. The LDF’s election manifesto in 2021 had promised to increase the welfare pensions, currently at ₹1,600 a month, to ₹2,500.
In the state’s annual statement, the fiscal deficit as percentage of GSDP has been pegged at 3.16% in FY 2025-26, down from 3.51% the previous financial year. The deficit has grown from 2.5% in FY 2022-23 to 2.99% in FY 2023-24.
In the recently released Niti Aayog Fiscal Health Index of States, Kerala was advised to adhere to a fiscal consolidation path as it faced high debt, listless revenue generation measures and a great deal of social welfare commitments.
The total debt of the state government as % of the GSDP has declined marginally from 35.38% in 2022-23 to 34.22% in 2024-25 and is estimated to come further down to 33.77% in the next FY.
In his address, the finance minister claimed that over the years the administration has been able to reduce fiscal deficit and debt burden “despite facing major setbacks in in terms of allocation of grants and tax share from the Union government.”
“We are sustaining now by augmenting own tax revenue, avoiding unnecessary expenses and prioritising other expenses. We will be able to augment state’s own tax revenue which was ₹47,660 crore in 2020-21 to ₹81,000 crore by the end of 2024-25. This is an increase of 70% in four years,” the FM said. The state’s own tax revenue (SOTR) to GSDP in 2024-25 is 6.5% and in 2020-21, it was 8.4%.
Among the major announcements on Friday in the budget speech was the allocation of ₹750 crore towards the first phase of rehabilitation of landslide survivors of Chooralmala-Mundakkai in Wayanad. The minister said that while the Union government has not announced any assistance in the latest union budget, he hopes that the Centre would do what it has done similarly for other disaster-struck states.
On the infrastructure front, Balagopal announced that preliminary activities will begin in the next FY to set up a metro system in Thiruvananthapuram akin to Kochi. Other projects announced include a “growth triangle” in the Vizhinjam-Kollam-Punalur belt which will comprise of multi-modal industrial parks, assembling and processing units to exploit the benefits of the Vizhinjam transhipment port, an IT park in Kollam city and further expansion works of the Vizhinjam port.
On the revenue mobilisation front, the finance minister announced several measures to boost its flagging figures. These include hike in court fees under 16 different heads through which additional revenue of ₹150 crore is expected, a 50% increase in land tax poised to generate ₹100 crore additionally every year, a higher tax burden on vehicles that exceed 15 years and a 10% tax on electric vehicles with battery renting. These proposals together will send ₹335 crore to the government coffers, it is estimated.
Another initiative announced by Balagopal to utilise lakhs of vacant homes and at the same time ensure budget accommodation for tourists was the ‘K-Home’ project. In his speech, the minister said that vacant homes in a 10-km radius of tourist hotspots like Fort Kochi, Munnar, Kumarakom and Kovalam will be utilised to offer budget stay options for travellers. This will also generate income for the home-owners, he said.
The opposition Congress-led UDF termed the budget “hollow” and said it would serve as the “farewell budget” of the current regime.
“The allocations in several departments are not even enough to cover the outstanding liabilities of those departments. Additionally, the government has cut the funding for scholarships for minority and SC/ST students. In the Life Mission housing scheme, ₹500 crore was allocated last year, but only 24% of the allocation was actually spent. So, these promises are hollow,” said leader of the Opposition in the state assembly VD Satheesan.
BJP state president K Surendran said the budget fell short of expectations and criticised the 50% hike in land tax.
“The finance minister continues to repeat the same lie that the Centre is showing apathy towards the state. It blames the Centre to hide its own financial mismanagement. Kerala is only able to move forward because of the grants from the Centre in various schemes,” he said.
