KOCHI: Does Finance Minister K N Balagopal’s budget calculations add up, or is he offering empty promises that are reliant on the economy’s robustness and tax-collection efforts? The budget document outlines an impressive increase in revenue receipts, aiming for Rs 1,52,351.67 crore (BE) in 2025-26, up from revised estimates (RE) of Rs 1,32,929.80 crore for 2024-25. However, a significant shortfall of Rs 6,000 crore was reported between the budget estimates (BE) and RE for FY25.
The minister’s optimism hinges on substantial growth in the state’s own tax revenue, projected to rise to Rs 91,514.75 crore from Rs 81,627.29 crore (RE) in FY25. Non-tax revenue is also expected to increase to Rs 19,145.53 crore from Rs 17,905.65 crore (RE) in FY25.
The budget has highlighted that the significant increase in the state’s own tax revenue and non-tax revenue has been instrumental in bringing about a positive change in Kerala’s fiscal status. It also adds that the state’s fiscal sustainability is attributed to the augmentation of its own tax revenue, reduction of unnecessary expenses, and prioritisation of other expenses.
However, a closer look at the Economic Survey 2024 reveals that the government managed the state treasury by reducing and delaying expenditure in FY23 and 24. Revenue expenditure decreased by 2.9% in FY23, from Rs 1,46,179.51 crore in the previous fiscal, but edged up 0.48% in FY24, reaching Rs 1,42,626.34 crore.
On record, Balagopal in his last full budget stuck to fiscal consolidation projecting a fiscal deficit of 3.16%, compared with 3.51% (RE) in FY25. Notably, the initial BE for FY25 was 3.40%. He has also reduced the primary deficit as percentage of GSDP to 0.93 from 1.18 in the previous budget.
B A Prakash, former chairman of Kerala Public Expenditure Review Committee, said it is a highly-inflated budget and not realistic. “There is an acute fiscal crisis in the state and the latest CAG report says the annual borrowing is very high,” he added.
M K Sukumaran Nair, former director of the Centre for Budget Studies at CUSAT, praised Balagopal’s efforts given the state’s constraints. However, he noted that budget estimates are often inflated, and it’s challenging to achieve the projected revenue.
“The budget projections are based on past averages, and Kerala’s revenue receipts right after the pandemic increased significantly..The finance minister must be pragmatic, as revenue isn’t increasing, and the state’s share of revenue from the Union government has decreased due to lower devolution,” he told TNIE. He suggested that if Kerala had received its fair share of tax and grants, the budget could have been more ambitious and optimistic.