Kerala is ready for a take-off, claimed state finance minister K N Balagopal while presenting the budget for 2025-26. It better be, given how its economy has stagnated all these years, primarily owing to a lack of initiatives, foresight and other factors such as the new national tax regime and the pandemic-induced distress. Balagopal said Kerala has overcome the fiscal constraints that curbed its development and is ready to embark on a phase of rapid growth. After successive years of fiscal distress, the finance minister’s words should be a relief, if only the numbers he presented matched his optimistic view and the ground realities were better reflected in the budget estimates. There are indeed some positives in the budget, but it lacks clarity when it comes to financial goals. While it marks a significant departure from the Left’s traditional ideological stance, emphasising land pooling and private sector engagement to drive development, the realisation of the objectives depends on robust growth, a substantial increase in tax revenue and grants from the central government.
The budget aims to increase revenue receipts by nearly ₹20,000 crore to ₹152,351.67 crore in 2025-26, but does not present convincing arguments on ways to achieve such an impressive growth. Balagopal has projected a lower fiscal deficit of 3.16 percent, but it must be noted that the revised deficit for 2024-25 was 0.11 percentage points higher than the budget estimate of 3.40 percent. On a positive note, the budget focuses on creating a new economic paradigm by leveraging opportunities presented by the Vizhinjam port, the ongoing national highway project, growth in the IT and industrial sectors, and research in higher education. The budget document adopts a positive tone towards AI and the Chinese disruption, pinning hopes on technology to boost investments and employment, and announces the creation of a cluster to make graphics processing units.
Contrary to what was expected from the last full budget of the Left Front government, the finance minister has resisted the temptation for populism, which lends credibility to his approach. But more revenue generation initiatives are needed. The finance minister has rightly identified the lacuna in physical infrastructure as a stumbling block in using the state’s human capital. The budget needed to do more to address it. The state may indeed be ready to take off, but what it needs is a good push from policies and planning.