Kerala Finance Minister K N Balagopal on Thursday presented the State Budget for 2026–27, aiming to balance aggressive infrastructure development with a wide range of welfare enhancements. As the final budget of the second Pinarayi Vijayan government, the document outlines a "New Normal" for the state, featuring significant increases in social security pensions, honourariums for scheme workers, and the introduction of an Assured Pension Scheme for government employees.

While the government describes these measures as fulfilling election manifestos, the timing and scale of the welfare outlays—ranging from free graduate education to a massive ₹3,720 crore women’s financial assistance scheme—suggest a strategic focus on broad demographic bases ahead of the upcoming Assembly polls.

A welfare-heavy agenda for the common man

The budget prioritises social security, with the Finance Minister announcing that social security and welfare board pensions have been increased from ₹1,600 to ₹2,000 per month. This monthly assistance now reaches 62 lakh beneficiaries, and by the end of this government's tenure, a total of ₹54,000 crore will have been disbursed in welfare pensions alone.

Further expanding the social safety net, the budget earmarks ₹3,720 crore for the Chief Minister’s ‘Sthree Suraksha Scheme’, which provides ₹1,000 per month to women and trans-women aged 35 to 60 who are not covered by other schemes. Additionally, the 'Connect to Work Scholarship Scheme' aims to benefit five lakh educated youths with an allocation of ₹400 crore.

The government has also made a landmark announcement in the education sector, making graduate degree education free in all Arts and Science colleges across the state.

Wooing the workforce: honourariums and pensions

In what appears to be a concerted effort to address the concerns of various labour sectors, the budget implements significant pay increases:

  • Anganwadi and ASHA workers receive a monthly wage increase of ₹1,000.
  • Pre-primary teachers and Saksharatha Preraks also receive ₹1,000 per month.
  • Noon-meal workers at schools receive a daily wage increase of ₹25.

Crucially, the government has moved to secure the support of its employees by announcing the disbursal of remaining DA/DR instalments in full by March 2026. Furthermore, the controversial contributory pension scheme will be replaced by a new 'Assured Pension Scheme' from 1 April, ensuring employees receive 50% of their last basic pay as pension.

Infrastructure and the "take-off" economy

Despite the heavy welfare focus, Balagopal insisted that Kerala is ready for a "take-off" into higher economic growth. The budget sets a total plan outlay of ₹35,750 crore, a 10% increase over the previous year.

Key industrial and technological projects highlighted include:

  • Vizhinjam Port Phase 2: Work accelerated to complete the project 17 years ahead of the original 2045 schedule.
  • Rare Earth Corridor: A new corridor connecting Vizhinjam to Chavara and Kochi to establish Kerala as a "permanent magnet hub".
  • Cyber Valley: A 300-acre IT and AI hub planned for Kochi InfoPark Phase III.
  • Hydrogen Valley: Crucial steps for a hydrogen fuel-based economy, attracting ₹10,000 crore in renewable energy investment.

The budget also highlights the rapid progress of National Highway 66, noting that Kerala is the first state to pay 25% (₹5,580 crore) of the land acquisition costs for a national highway.

Fiscal recovery and the war with the Centre

The Finance Minister claimed a "top-secret" success in fiscal management, stating that Kerala has recovered from its long-term crisis. Sources say the state generated an additional ₹1.27 lakh crore in own-tax revenue over the last five years. Notably, the Debt-to-GSDP ratio has reportedly fallen from 38.47% in 2021 to 33.44%.

However, a significant portion of the budget speech focused on "severe financial neglect" by the Union Government. Balagopal accused the Centre of "Note Chori" (theft of funds), alleging that the state’s share of the divisible tax pool has been drastically cut and borrowing limits unexpectedly curtailed by ₹17,000 crore this year alone.

Agriculture and traditional sectors

The primary sector received a total project outlay of ₹2,071.95 crore. To support farmers, the budget maintains the procurement price of paddy at ₹30 and raises the support price of rubber to ₹200. A new "two-tier" procurement model for paddy will allow farmers to receive direct payments through co-operative societies from the upcoming season.

For traditional sectors, the budget allocates:

  • ₹242.34 crore for traditional industries including handloom and cashew.
  • ₹110.64 crore for the coir sector.
  • ₹56 crore for the cashew sector to modernise factories and ensure raw material availability.

Environmental and social innovations

Kerala continues to brand itself as a progressive state through several "firsts":

  • Elderly Budget: Kerala is the first state to present a dedicated document for senior citizens, now 18.7% of the population.
  • Extreme Poverty Eradication: The government claims to have lifted 1,03,099 persons out of extreme poverty, comparing it to China’s success.
  • Nativity Card: A document to address concerns regarding the Citizenship Act and voters’ list revisions.

Budget estimates at a glance

The Revised Estimates for 2025–26 show a revenue deficit of ₹36,889.19 crore. For 2026–27, the budget estimates are:

  • Revenue Receipts: ₹1,82,972.10 crore
  • Revenue Expenditure: ₹2,17,558.76 crore
  • Revenue Deficit: ₹34,586.66 crore
  • Cumulative Deficit: Projected at ₹1,773.46 crore after additional announced expenditures

In concluding his sixth budget, Minister Balagopal called for the "Unity of Keralites" to combat communalism and central neglect, framing the budget as a tool for "social justice and social welfare" while simultaneously building world-class infrastructur