Kerala’s new government has presented a revised budget featuring a series of multi-crore development proposals, even as it reiterated concerns flagged in the state’s Fiscal Health Status Report (White Paper) released earlier this month.

The budget speech, delivered on June 19, broadly aligns with the report’s assessment of the state’s finances, including its projection that Kerala’s total debt has reached ₹5.07 lakh crore. The government also restated the report’s position that 77% of every rupee earned by the state is consumed by committed expenditure, mainly salaries, pensions and interest payments on past borrowings.

According to the report, this level of committed spending leaves limited fiscal space for developmental activity. Capital expenditure, or spending on infrastructure, is placed at around 1.3% of the state’s economy, described as one of the lowest among Indian states.

The government also said earlier revenue projections were “fundamentally flawed”.

As a result, the revised budget has reduced the planned development outlay from ₹35,750 crore to ₹30,370 crore.

KIIFB liabilities and institutional restructuring plan

The budget also revisited the financial position of the Kerala Infrastructure Investment Fund Board (KIIFB), a key infrastructure funding vehicle.

The Fiscal Health Status Report had described KIIFB’s classification as an independent entity as a “financial sleight of hand”, arguing that its borrowings ultimately remain the state’s responsibility.

Echoing this view, the Chief Minister noted in the budget speech that the state is now “saddled” with KIIFB-related liabilities, including ₹21,000 crore in debt and ₹35,000 crore in ongoing projects.

To address governance concerns, the government announced plans to constitute an Expert Committee to restructure KIIFB’s operational framework.

In addition, the budget highlighted a higher level of accumulated liabilities than previously estimated. While the report had placed arrears at around ₹48,733 crore, the budget speech cited total “accumulated liability” of ₹87,012 crore, factoring in wider social security obligations.

Investment push and welfare commitments amid fiscal constraints

The Fiscal Health Status Report suggested that Kerala’s financial challenges cannot be addressed solely through expenditure control, and emphasised the need for private investment-led growth.

In line with this, the budget proposed “Invest Keralam”, a single-window clearance mechanism intended to streamline processes, particularly land acquisition, which was described as part of wider administrative “red tape”.

At the same time, the budget introduced a set of new welfare and development commitments. These include Mission Samudra, aimed at developing the coastline into a maritime hub, and the Indira Guarantees scheme, which allocates ₹600 crore for free bus travel for women and transgender persons.

It also proposed higher monthly payments for ASHA and Anganwadi workers under revised welfare provisions.

Salary arrears, DA payments and planning reforms

The health report had noted that earlier fiscal consolidation efforts included delays in paying Dearness Allowance (DA) to government employees. The new budget, however, states that DA and pension-related relief will now be provided “without any hindrance”.

To improve expenditure management, the government also plans to reconstitute the State Planning Board into a “Think Tank”, tasked with identifying more efficient spending strategies.

The budget proposals sit alongside warnings of constrained fiscal space and liquidity stress highlighted in the health report, which continues to form a key reference point for the state’s financial position.