Kerala budget 2025-26 charts development roadmap but fiscal concerns remain
Finance Minister K N Balagopal concluded his speech stating that every budget is a historical document which is a testament to not only the economic facet of life but also the political, cultural, and social lives of all those involved. He further expressed the optimism that his budget will be a treatise of development for future Kerala.
There is no doubt that the concept of budget has evolved during his tenure to emphasise on critical pre-requisites for development such as research and development (Rs 4,039.36 crore for 2025-26), conservation of Kerala’s fragile ecosystem (Rs 904.57 crore across 95 schemes under 10 sectors), and enhanced citizen’s understanding of the budgetary process.
Other vulnerable segments such as women (Rs 4,840.12 crore), transgenders (Rs 6.93 crore), and children (Rs 1,713.26 crore) are targeted through the gender and child budget. The ‘New Innings’ which encourages senior citizens to be socially active in economic activities and ‘Healthy Ageing’ are initiatives that respond to the changing demographic profile of the state.
The budget also lays down the roadmap for Kerala’s development, specifying that it shall be built on four key pillars: sectors that are in line with the state’s commitment to environment protection, leveraging existing assets especially the land available with government departments, building investor confidence, and formulation of investor-friendly policies.
Some of the development sectors so identified as suitable for Kerala include information technology, MSMEs, startups, tourism, hospitality, and wellness and healthcare, and other knowledge-based ventures. The available resource envelope thus provides for the development of these areas along with human capital formation (through education and heath expenditure) which is a common pre-requisite for the development of all sectors.
However, the question remains whether all efforts have been made to enlarge the resource envelope sufficiently to propel Kerala onto the perceived, planned growth trajectory.
While attempts to revise court fees and land taxes will rake in some additional revenue and the mention of exploring strategies to make KIIFB projects generate revenue is welcome, the fact remains that our revenue deficit as percentage of GSDP continues to be a high 1.9% (as against the revised estimate of 2.29% for 2024-25). The fiscal deficit is 3.1% of GSDP (revised estimate of 3.51% for 2024-25) and the primary deficit 0.93% (revised estimate of 1.18% for 2024-25).
Even such targeted improvements in fiscal heath indicators will become possible only on realisation of targeted revenue receipts of Rs 1,52,351.57 crore. If that does not happen, fiscal consolidation will become possible only through the often touted path of cutting down on allotted expenditure. Time will tell whether the Budget 2025-26 will be a treatise on development for future Kerala or a mere wish list. As the saying goes, the proof of the pudding is in the eating.