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Informist, Friday, Feb. 7, 2025

 

By Priyasmita Dutta 

 

NEW DELHI – Kerala's Finance Minister K.N. Balagopal Friday presented the Budget for 2025-26 (Apr-Mar) highlighting that the state "is all set to embark on a phase of rapid economic growth". The Budget projected the state's GSDP growth in FY26 to rise to 11.9% from a revised 11.3% in FY25. "If we put in the language of development discourse, Kerala is in a stage of take-off," Balagopal said in his fifth Budget speech. 

 

The Budget pegged the state's fiscal deficit at 3.16% of GSDP for FY26, down from the revised estimate of 3.51% of GSDP this year. The state's market borrowing in FY26 is projected to be INR 345.07 billion, up 6.6% from the revised estimate for FY25. According to the Budget document, the market borrowing for the current fiscal is projected to be lower than the Budget estimate by INR 21.94 billion. 

 

While Balagopal's gave a miss to announcements of huge welfare schemes in the Budget, it had good news for government employees and pensioners. The finance minister said that service pension arrears will be distributed in February, two instalments of pay revision for government employees will be disbursed during this fiscal and the two-year lock-in period for Dearness Allowance arrears will also be removed. This led to the government projecting its pension outgo at INR 294.60 billion, up 6.8% from the revised estimate for FY25. 

 

Revenue expenditure for FY26 is pegged at INR 1.67 trillion, up 10.7% from the revised estimate of INR 1.62 trillion for FY25. This includes the expenditure on salaries, pensions, interest, grants, and subsidies. The revised estimate for revenue expenditure in FY25 is lower than the Budget estimate by INR 43.76 billion.

 

Interestingly, there was an expectation that Balagopal would announce an assured pension scheme as part of its overhaul of Kerala's pension system. But he did not roll it out, adding that "actions for implementing the Assured Pension Scheme will be taken after evaluating the Unified Pension Scheme announced by the Union government and similar pension schemes prevailing in other states."

 

Presenting the last full Budget of the Pinarayi Vijayan government's second term, the finance minister focussed on urban infrastructure and healthcare. The total Budget allocation for the health sector was projected at INR 104.30 billion for FY26, Balagopal said. "Fiscal deficit, revenue deficit and debt burden were not reduced by cutting development and welfare expenditure," he said. 

 

The capital expenditure for FY26 is projected at INR 191.06 billion, up 14.8% compared to the revised estimate of INR 166.46 billion for FY25. The revised capital spending outlay is 6.6% lower than the Budget estimate. As part of rebuilding landslide-hit Wayanad, Balagopal announced a INR 7.50-billion package for the first phase of reconstruction initiatives and blamed the Centre for its lack of support. He also allocated INR 11.60 billion for housing projects under the LIFE Mission for FY26.

 

On the revenue side, the finance minister projected the revenue receipts for FY26 at INR 1.52 trillion, 14.6% higher than the revised estimate for FY25. The state's own tax revenue is seen growing 12.1% on year to INR 915.15 billion, while the state's non-tax revenue is seen growing 6.9% on year to INR 191.46 billion. 

 

In its own tax revenues, goods and services tax and value added tax make up the majority chunk, which are seen growing 12.5% and 10.3% in FY26, respectively, compared to the revised estimate for FY25. In absolute terms, they are projected at INR 377.63 billion and INR 335.91 billion, respectively. "...the huge achievement in augmenting own tax revenue and non-tax revenue is the reason behind the positive change in the fiscal status of the state," the finance minister said.

 

As part of its revenue mobilisation plan, the state government hiked land tax by 50% to mobilise INR 1 billion and increased court fees to garner another INR 1.5 billion in FY26. Balagopal also announced hiking tax for electric vehicles and contract carriage vehicles. On top of that, he announced a 50% hike in tax for two-wheelers and three-wheelers aged 15 years and above. These four announcements created a ruckus in the assembly, with many opposition leaders criticising the move. 

 

Collections from the lottery business contribute to the majority of Kerala's non-tax revenues. It is projected at INR 141.21 billion in FY26, 6.6% higher than the INR 132.44 billion in the revised estimate for FY25. Kerala State Lotteries is a lottery programme run by the state government since 1967, after it banned all private lotteries. 

 

Transfer from the Union government to Kerala in FY26 is projected at INR 416.91 billion, up 24.8% from the revised estimate of INR 333.97 billion for FY25. "What was the reason for the fiscal constraints faced by the State? Central negligence is the singular answer to this," Balagopal said.  End

 

Edited by Saji George Titus

 

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