The budget presented by Kerala’s new UDF government is like an undercooked dish—it has all the ingredients, yet does not have the required flavour. Belying expectations of a paradigm shift, the budget has shied away from any concrete proposal to offset the structural squeeze on the economy, where committed expenditure has left very little room for capital spending. Armed with a massive mandate and a white paper that exposed an economy fraying at the edges, the government was expected to do much more.
However, credit must be given to Chief Minister V D Satheesan, who is also the finance minister, for finally confronting reality. By acknowledging that Kerala can no longer depend on the central government, he has chosen to walk a fiscal high-wire—balancing a suffocating treasury against the hopes of millions. Admitting you have a problem is a welcome first step. But the real question is how to address it. The structural math remains stubbornly rigid as 77 paise of every rupee the state earns is swallowed by salaries, pensions and interest payments. This budget barely does anything to address the burden.
On a positive note, it lays out a blueprint for growth, pivoting explicitly towards port-led development with an industrial corridor. It also prunes uncommitted spending and slashes the annual plan outlay by 15 percent to ₹30,370 crore. Crucially, this was achieved not through fresh resource generation, but by aggressively reshuffling allocations. The only genuinely new tax sits on low-alcohol beverages.
The new welfare guarantees sound generous, including free bus travel for women costing the state ₹600 crore, increased ASHA and Anganwadi honorariums, and the Oommen Chandy Health Insurance Scheme. Remarkably, none of this is funded by tax increases. Instead, the government is banking on targeted restructuring, AI-driven GST analytics to catch defaulters, and sin taxes. In a welcome move, the state has openly acknowledged the Kerala Infrastructure Investment Fund Board’s debt problem, ending years of fiscal deception.
The budget relies on private capital to expand the state’s economic horizons. While this can be a route out of the morass in the long run, it will take years to bear fruit. Meanwhile, until the shrinking revenue base is structurally widened and expenditures legally overhauled, the economy’s breathing room will continue to shrink with every passing fiscal. Kerala has embraced the truth; it still awaits the cure.