Kerala Budget: Projects are many, funds are lacking

After decades of LDF rule, Keralites voted in the UDF with a large majority; so it is reasonable to assume that voters would want a major shift in economic policy. While not much can be expected from the current budget, especially when the overall size of the budget has been reduced without concrete plans to mobilize resources, the UDF government has deviated significantly from its position as detailed in the White Paper released a few weeks earlier.

While the White Paper cited a number of problems facing the government, including fiscal stress, lower remittances and inflation, the budget contains no meaningful measures to address these problems. No specific sources of revenue are listed for financing infrastructure investments, which were previously largely done through KIIFB. This budget is criticized by the KIIFB and it has set up a committee of experts to revise it. Vehicle taxes were reduced, which accounted for the major share of KIIFB’s revenue. In fact, the budget crushed the KIIFB while proposing other exchequer-funded infrastructure initiatives. How effectively the under-resourced state could achieve this remains to be seen.

The measures planned as part of “Land Reform 2.0”, including the fair value review, will have far-reaching consequences. This could be seen as a serious initiative by the state to attract private investment where land availability would be a key factor. However, this cannot be seen as a transparent approach, as VD Satheesan’s assertion – that the state will remain an intermediary rather than an active participant in the economy – reveals the true nature of the UDF government.

The second round of land reforms is aimed at pooling land, first to create a land bank and then to turn the state into a destination for private capital. But when coupled with the larger Samudra mission and rare earth corridors, it is not unreasonable to fear a creeping closure by corporate capital where livelihoods and ecological interests are marginalized.

It is the federal government’s neglect of Kerala’s interests that was responsible for over ₹20,000 crore in the budget presented by LDF’s KN Balagopal. Rather than questioning the Centre’s stance on federal relations, the current finance minister is trying to find a realistic resource base to finance his promises. As promised in the manifesto, health insurance of ₹25,000 per family was announced. The fee the government has to pay for the program could be as high as the state’s annual health budget. Whether this will affect public health networks in the state remains to be seen.

The budget does not offer any new direction for future developments, apart from some regular announcements and reworking of LDF projects. He appears to be managing the state’s fiscal stress by cutting government spending rather than by taking any innovative steps to mobilize resources. There seems to be no mention of social pensions or flagship projects of the former government like Wayanad Township, eradication of extreme poverty or the transformative Life Mission.

Although the finance minister talks about the Nehruvian legacy, the budget does not seem to have much room for improvement in the public sector. Rising inflation, now above the national average, with a predicted tendency to rise further, was not taken seriously.

In terms of resource mobilization, there is very little in the new budget, apart from amnesty for tax arrears, and this has to be seen in conjunction with Oommen Chandy’s health insurance scheme and the planned increase in SMEs without any realistic resource base. If the state wants to jump-start growth, it will have to borrow from sustainable sources, and the UDF’s approach to debt management will have to be aligned to some extent with the LDF’s approach to rationalizing financial strategies.

(K. Ravi Raman is an author and political economist who was a member of the State Planning Board)

Published – 19 Jun 2026 23:34 IST