Kerala finance minister K N Balagopal’s budget for 2024-25 is reflective of the acute financial crisis that the state is facing and the political message the LDF government wanted to convey in an election year. In his two-and-a-half hour speech, he spared no opportunity to blame the Union government for Kerala’s financial inadequacies, but seemed to have let go of a chance to announce measures that could put the state on the path of fiscal consolidation. It appeared more as rhetoric, assigning financial challenges to the central government while assuming none on behalf of the state. While he repeated the claim that the Centre has denied the state its due share of Rs 57,400 crore, the fact is that challenges related to GST compensation, revenue deficit grant, and off-budget borrowing are issues faced by most states, not just Kerala.
While adequate revenue mobilisation was the need of the hour, the budget projected additional revenue of a meagre Rs 1,067 crore in 2024-25. The total debt as a share of the state GDP is expected to be 34.15 percent, and is likely to stay high unless structural changes are made. The budget also signaled an intention to shift from the existing pension scheme to a new system managed by the state that may impose additional liabilities on Kerala’s delicate economy. It outlined a contingency plan, referred to as Plan B, in case the central government’s “neglect” persists and the state does not receive any relief from the Supreme Court. While emphatically stating that the state does not plan to cut expenditure, the minister fell short of providing clarity on an alternative course.
In a positive sign, the fiscal deficit has been projected at 3.4 percent, down from the current 3.45 percent, and the state’s own tax revenue is showing a consistent upward trend. The budget outlined initiatives to attract investments of at least Rs 3 lakh crore over the next three years. This appears to be a pragmatic recognition of the need for more investment in crucial sectors. A budget is typically assessed through three pivotal criteria: one, the capability to increase revenue without adding to the burden of the vulnerable population; two, promoting growth via strategic investments in productive assets; and three, mitigating inefficiencies and curtailing expenditures. While Balagopal's budget avoids burdening the common man, it lacks concrete policies that could bring about a positive structural transformation in the state's finances.