Thiruvananthapuram: As the Union Budget is presented on Sunday, Kerala is watching closely—not so much for project announcements, but for the recommendations of the Finance Commission that will accompany the budget. These recommendations will determine how much money Kerala will receive from the Centre over the next five years.

The 15th Finance Commission had allotted Kerala only 1.93 per cent of the divisible tax pool. This time, Kerala argued before the Commission that it deserves 2.79 per cent. The state had also demanded that the overall share of central taxes devolved to states be increased from 42 per cent to 50 per cent. If Kerala receives 2.79 per cent of this enhanced pool, it would be a major gain. However, there is anxiety that a reduced share could adversely affect the state’s financial future.

Kerala prepared this year’s state budget based on the amounts it sought in its memorandum to the Commission. If the allocation is reduced, implementing the budget announcements will become extremely difficult.

Demand for a Special Package

To compensate for revenue losses caused by debt reduction measures and a decline in central assistance, Kerala has demanded that the Centre announce a ₹21,000 crore special package in the budget.

The state has also put forward new demands, including a Defence Research Corridor, a Rare Earth Corridor, a National Skilled Mobility Framework for returning expatriates, and investment for the modernization of micro, small and medium enterprises (MSMEs).

Another key demand is to increase the Centre’s share in the employment guarantee scheme from 60 per cent to 75 per cent.