If positive sentiments are enough to boost Kerala’s struggling economy, Finance Minister K N Balagopal may have done his bit. In his last full budget before the next assembly elections, Balagopal presented a rosy picture of the state finances, saying the economy has overcome the severe financial constraints and was set to embark on a phase of rapid growth.
He prudently refrained from announcing any major populist initiatives, and projected an ambitious growth of around 15% (nearly Rs 20,000 crore) in revenue receipts in 2025-26 to Rs 1,52,351.67 crore but stopped short of spelling out the precise roadmap to achieve the impressive number.
While the budget had schemes targeting almost all sections of society and made allocations to almost all sectors, the main theme of the speech was spreading positivity after years of financial distress.
“We have definitely overcome the trying times of severe fiscal constraints that had affected the state in recent years. It would be amply clear to even the casual observer of Kerala’s developmental pursuits that the state is all set to embark on a phase of rapid economic growth. If we put in the language of development discourse, Kerala is in a stage of take-off,” Balagopal said as he began his budget speech that lasted two and a half hours.
He expanded the budget size (total expenditure) from Rs 178,771.84 crore to Rs 198,582.40 crore, and sought to exhibit an image of fiscal prudence by projecting a lower fiscal deficit of 3.16% in FY26 compared to 3.51% in FY25.
In an effort to augment revenue, the finance minister tinkered with the land taxes, increasing basic rates across all slabs by 50% with the lowest tax slab going up from Rs 5 per are (2.47 cents) a year to Rs 7.5 per are. At the highest slab, the rise is from Rs 30 per are to Rs 45. Balagopal also proposed an increase in one-time road tax on private electric vehicles (EVs).
While the tax on EVs costing above Rs 15 lakh has been increased to 8% from the current 5%, the EVs priced Rs 20 lakh and above will be taxed at 10%. The budget introduced a 10% road tax on electric cars with battery renting facility, irrespective of the cost of the vehicle.
Balagopal, in his fifth budget, also announced several innovative measures, including utilising empty and unoccupied homes across the state in and around tourism destinations like Fort Kochi, Kovalam, Munnar etc., to boost tourism even while providing revenue for the house owners. He laid out plans to facilitate the setting up of Global Capability Centres (GCCs) for multinational corporations (MNCs) to help youngsters to get productive jobs here.
He also announced a ‘New Innings’ project to encourage senior citizens to launch novel enterprises/industries utilising their financial capacity and experience.
Explaining the higher revenue receipt projections, Dr K Ravi Raman, an expert member of Kerala State Planning Board, pointed out that Kerala’s GSDP grew 6% in 2023-24 in comparison to 4.2% the previous year.
“Further, there has been a decline in non-plan expenditure while the plan expenditure has risen by 7%. This will naturally lead to higher revenue mobilisation,” said Dr Raman.
Jose Sebastian, an expert in public finance and taxation, however, opined that the budget was a missed opportunity for the LDF government in terms of identifying new revenue mobilisation avenues.
“There were immense possibilities for resource mobilisation. For instance, Kerala spent Rs 50,275.91 crore in 2022-23 on health and educational sectors. What we got is only Rs 676.85 crore, just 1.35%. Tamil Nadu gets Rs 6.84 for every Rs 100 spent on health and educational sectors. Kerala could have easily increased it to 5% by taxing the richer section of the population,” he said.
What’s up
Land tax hiked by 50% to mobilise L100 cr
Court fees hiked to mobilise L150 cr
Tax for electric vehicles and contract carriage vehicles hiked
50% hike in road tax for 15-year-old and above two-wheelers and three-wheelers
What’s down
Tax for stage carriages reduced by 10%