No AIIMS, no major rail projects: Kerala faces setback in Union Budget 2026

Kerala’s push for a ₹21,000-crore fiscal rescue yielded selective victories but fell short on key infrastructure projects, as the Union Budget 2026-27 was unveiled on Sunday. Finance Minister Nirmala Sitharaman, presenting her ninth consecutive budget, focused on industrial corridors and coastal development rather than state-specific mega-projects.

Bold blueprint for recovery

Ahead of the budget, Kerala Finance Minister K.N. Balagopal highlighted the state’s severe fiscal strain caused by global economic shifts and central policies. Kerala’s ambitious "wish list" included an AIIMS, the Sabari Rail linking Angamaly and Erumely, and a 0.5% increase in borrowing limits.

The state also sought “catastrophe bonds” to address natural disasters and specific funds to resolve human-wildlife conflicts. With assembly elections approaching, hopes were high for a better deal from the 16th Finance Commission than in previous allocations.

Targeted gains for industry and coast

The budget delivered strategic wins for Kerala. The state was included in a new dedicated Rare Earth Corridor to advance mining and research.

Agriculture received a boost through a Coconut Promotion Scheme to replace ageing trees, alongside a programme aiming to transform Indian cashew and cocoa into global brands by 2030. Tourism initiatives included ecologically sustainable “Turtle Trails”, while marine exporters gained from a duty-free import limit increase on seafood processing inputs from 1% to 3%.

Historic session with mixed results

Prime Minister Narendra Modi highlighted the historic nature of Sitharaman’s ninth consecutive budget, surpassing P. Chidambaram’s record.

However, Kerala did not secure the requested ₹21,000-crore package or the AIIMS project. The 16th Finance Commission report maintained states’ tax devolution share at 41%. While the Mahatma Gandhi Gram Swaraj initiative provided relief to textile and handloom sectors, many long-standing infrastructure demands remain unresolved.

Though new Amrit Bharat trains were flagged off for Kerala previously, this budget prioritised long-term national reforms over state-specific mega-projects.