Kerala Budget: Glamour on the outside, concerns within 

THIRUVANANTHAPURAM: Although Finance Minister KN Balagopal presented a positive outlook on new investments and revenue growth in the state budget, deep concerns persist. The biggest challenge is how long the state can continue depending primarily on taxes and KIIFB for financial stability.

The budget lacks innovative revenue-generation strategies and instead leans heavily on higher taxes on alcohol, fuel, and property. While tax enforcement has been tightened to enhance collections, this also increases the financial strain on the middle class and businesses. Infrastructure development remains largely dependent on KIIFB, which requires strict repayment obligations, unlike traditional public borrowing.

Kerala’s primary revenue streams—taxes and non-tax revenue—can only expand if economic activities grow. No matter how effectively it is enforced, there is a natural limit to taxation. If people lack opportunities to earn, government revenues will also shrink. Large-scale infrastructure investments are necessary to promote agriculture and industrial production, but the budget fails to introduce substantial measures in this direction.

One of the most significant drawbacks of this budget is the absence of major infrastructure projects. Unlike previous budgets that prioritized megaprojects like Vizhinjam Port and the Kochi Metro expansion, this year’s budget lacks noteworthy new initiatives. The government anticipates Rs 1,52,351 crore in revenue, but expenditures are projected to rise sharply to Rs 1,96,348 crore, driving the fiscal deficit to 3.40%, signalling serious financial strain. The reality is that Kerala cannot sustain its economy without substantial support from the central government, a fact that the finance minister himself has acknowledged.

The first casualties of the financial crisis will likely be welfare schemes. Over the last 42 months, Kerala has spent more than ₹33,210 crore on pensions, ranking among the highest social security expenditures in India. However, the pressing question remains: how long can these welfare benefits be maintained through continuous borrowing without sustainable revenue growth?