Kerala, for many a model state on quality-of-life indicators, has been in economic reverse gear for long. Successive governments, both of the Left Front and the Congress-led United Democratic Front, have relied on heavy borrowings. The fallout has been significant.
The state currently bears a significant public debt burden—estimated at Rs 5.07 lakh crore, which is over 33 per cent of its Gross State Domestic Product (GSDP), suggests a white paper tabled in the legislative assembly by chief minister V.D. Satheesan.
The white paper states that in 2025-26, committed expenditure—government employee salaries, pensions and interest payments—consumed 77.6 per cent of the revenue receipts. At 1.3 per cent of the GSDP, Kerala’s capital expenditure was “one of the lowest” among states.
The fiscal deficit, accumulating over the years, demands a strong intervention from the government. “Kerala needs urgent overhauling of its public finance system. It must make a strategic shift from being a welfare state towards becoming a sustainable economic power that adopts new fiscal models to generate revenue,” Jiji Thomson, former chief secretary of Kerala, told INDIA TODAY.
Commenting on the findings of the white paper, Thomson said Kerala’s economic health depends on “realising untapped revenue resources without passing the burden to the poor, and effectively managing assets”.
Drawing a new revenue roadmap, Thomson remarked: “The state needs to increase user charges in health and education to mobilise an additional revenue of about Rs 2,410 crore. The government must also take over property tax collection, which is currently carried out by local bodies. Levying property tax at a uniform rate and rationalising tax collection could generate Rs 25,000 crore worth of additional revenue annually. Similarly, levying higher power tariffs on Above Poverty Line consumers while exempting those Below Poverty Line could bring in extra revenue.”
The government must also review royalty on mining and promote private investment in infra. “The process of privatisation in the state must follow transparency and be overseen by a monitoring committee. Otherwise, controversies will derail the process,” Thomson said.
Terming dispensations in Kerala as lacking in political will to implement new ideas and reforms, Sanjay Vijayakumar, former CEO of the Kerala StartUp Mission, said: “Kerala lagged in developing a digital ecosystem, scaling up the digital economy and building global knowledge hubs with the support of Non-Resident Keralites. This doesn’t require huge money, rather a platform in which technocrats and investors can share views, showcase their innovations and explore collaboration.”
Presenting the white paper as a document for the state’s economic uplift, Satheesan had informed that his government inherited Rs 48,733 crore worth of liabilities from the previous regime. The White Paper stated that falling tax revenue and central government assistance was further pressuring the state. Experts say that given the central restrictions on Kerala’s borrowing limits, strong and innovative resource mobilisation was the need of the hour to prevent the state from slipping into economic turmoil.
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