June 13, 2021

Kerala’s Pro-people Budget in Covid Times

R Ramakumar

THE return of the Left Democratic Front (LDF) to power in Kerala in May 2021, with an unprecedented mandate, was driven by an extraordinary record of governance on multiple fronts. On the one hand, the economic policies of the central government led to falling economic growth rates, rising unemployment and poverty and shrinking public revenues. Kerala was particularly severely affected by many of these misadventures in policy. On the other hand, Kerala was hit by multiple natural calamities, an epidemic and a pandemic between 2016 and 2021.

The people’s mandate of 2021 was a reaffirmation of their faith in the LDF: for guiding the economy and society through these extremely tough periods; for the care extended to people in distress; for strengthening the State’s social security system; and for the efficient completion of a range of infrastructure projects that benefitted the masses. As a result, Kerala’s economy could maintain an economic growth rate above the national average. Government’s expenditures in key social sectors were sustained. Capital investment was substantially raised in critical economic sectors.


Kerala’s record in handling the Covid-19 pandemic was hailed as exceptional by global and national observers. On the health front, Kerala used its historical strength in public health care to expand health infrastructure i.e., number of beds, ventilators, oxygen supply, doctors, nurses and frontline workers. The state also massively increased its testing capabilities. There were also measures, in active cooperation with local self-governments, to ensure effective contact tracing as well as institutional and home quarantine measures. Special programmes were also initiated to address emerging issues of domestic violence against women and deterioration of mental health. Consequently, Kerala’s health infrastructure was always a step ahead of the pandemic’s propensity to spread.

Equally significant were the interventions on the socio-economic front. Kerala was the first state in India, in early-March 2020, to declare a Covid-19 economic relief package of size                 Rs 20,000 crore. First, close to a third of the state’s population was covered with a cash transfer. The total amount transferred to the beneficiaries between March 2020 and May 2020 was close to Rs 5,500 crore. Almost all the beneficiaries belonged to working class households. Also, women constituted majority of the beneficiaries.

Secondly, free food grains were provided through the public distribution system (PDS) long before the central government stepped in. Thirdly, more than 1000 community kitchens were set up across the state where free food packets were available everyday either for free or at a nominal rate of Rs 20 per packet. Fourthly, free food kits were distributed to every household through the lockdown period; this measure was received with enormous warmth by people from every section of the society.

Fifthly, women in self-help groups were provided with loans worth Rs 2,000 crore to tide over situations of livelihood distress. Sixthly, employment under Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS) was substantially scaled up; compared to 2019-20, about 2.1 crore person-days were additionally generated in 2020-21. More than 6 lakh person-days of work were also additionally generated under the Ayyankali Urban Employment Guarantee Scheme (AUEGS). In addition, self-employment and wage employment was generated for more than 50,000 persons under a special 100-day programme on employment.

Kerala response – on the health and socio-economic fronts – was hailed as a model for other states to follow during the pandemic. The overwhelming mandate for the LDF in May 2021 reflected a deep desire among people for a continuation of these policies.

In February 2021, the LDF government had presented a budget for 2021-22. While the normal practise is the presentation of an interim budget at the end of an outgoing government, a full budget was presented by the then finance minister T M Thomas Isaac. This budget was an exposition of the developmental vision of a future LDF government. It outlined measures to further strengthen the social security system in the state, increase investment in key economic sectors like infrastructure, transform the state into a knowledge economy, expand the skill base of the state’s workforce and use higher education as a driver of these changes. This vision was enthusiastically accepted by the people, which again was reflected in the May 2021 mandate.

FOR 2021-22

A revised budget for 2021-22 was presented on June 4, 2021 by the new finance minister K N Balagopal. This revised budget began with a commitment to take forward the vision espoused in the February budget. However, it also updates the budget considering several new developments that had taken place in the intervening period.

First, the second wave of the pandemic had hit the state. New resources were needed to meet the new challenges. Balagopal underlined that “Health First” would be a slogan of the government over the remaining part of the financial year. Secondly, due to the second wave, economic activities had come to a standstill. New resources were needed to ensure relief to people, and that Kerala can restart economic activities at the earliest particularly in sectors like tourism. Thirdly, the LDF had approached the electorate with a wide-ranging manifesto. Several promises made in the manifesto had to be incorporated into the budget to ensure adequate allocation of resources.


The most important highlight of the revised budget was the announcement of a second economic relief package of size Rs 20,000 crore. The central government, on its part, has not announced any economic relief package for 2021-22. Kerala’s effort is, thus, not just pioneering but also a model for other states. Balagopal announced that Rs 8,900 crore of this Rs 20,000 crore (or 45 per cent) would be a direct disbursement of cash to people through welfare fund boards and as part of social security pensions. In 2020-21, about 80 lakh people in the state were covered by a cash assistance. Considering the same coverage in 2021-22 too, this package would amount to an average transfer of Rs 11,125 to each beneficiary (of course, there would be variations across beneficiaries). Additional efforts would also be made to expand the coverage of MGNREGS and AUEGS.

Another Rs 8,300 crore (or 42 per cent) would be spent to provide soft loans to people and enterprises. This amount has been divided into three parts. One, the Cooperative Initiative for Agriculture Infrastructure in Kerala (CAIK) would ensure investment credit at an interest rate of 4 per cent per annum to create local markets, warehouses, cold chain facilities and fruit processing centres for pineapple, banana and mango. This credit facility would also be available to create modern fish marketing facilities, hygienic meat marketing facilities and processing centres for vegetables, milk, meat and fish. Two, soft loans would be made available to begin new enterprises as well as rejuvenate the existing non-operational enterprises in a range of sectors. Three, neighbourhood groups (NHG) of women under the Kudumbashree Mission would receive fresh livelihood loans at an interest rate of 4 per cent per annum.

The remaining Rs 2,800 crore was set aside to meet the health-related emergencies. This allocation is expected to further strengthen the preparedness of the state in the context of warnings about a third wave. The plan is to set up ten-bed isolation wards for contagious diseases in every community health centre, taluk hospital, district hospital and general hospital. Each medical college would also have new blocks for managing contagious diseases.

Special attention would also be given to the establishment of new paediatric ICU wards in selected district hospitals and medical colleges. A new Liquid Medical Oxygen (LMO) plant with a capacity of 150 metric tonnes along with a reserve storage capacity of 1000 metric tonnes and supply tankers would be established. Finally, in the lines of the Centre for Disease Control (CDC) in USA, a new institution would be established as a centre of excellence capable of providing multi-disciplinary skills in controlling contagious diseases. New vaccine research centres – at the new Institute of Advanced Virology – and production units – at the Life Sciences Park – would also be established.


In agriculture, the budget focusses on further developing the Subhiksha Keralam scheme, an important initiative of the previous LDF government. The government would transform all panchayat-level Krishi Bhavans into Smart Krishi Bhavans, which would improve their ability to perform the function of agricultural extension. Agricultural marketing would be another area of focus, where additional public investment would be ensured. Value addition is yet another area of emphasis. Industrial use of several crops like tapioca, cashew, mango, jackfruit, banana and spices would be encouraged. Five agro-parks would be set up. In milk, given that Kerala is close to self-sufficiency in production, a milk powder factory would be set up along with a value addition unit. In the plantation sector, which stands ravaged by the centre’s free trade policies, focus would be on allowing gradual diversification of the cropping pattern – without changing the basic character of plantations – towards fruit crops like rambutan, avocado, dragon fruit and mangosteen.

In the coastal areas, the coastal highway of the last LDF government is progressing fast. More money has been allocated to ensure its early completion. Coastal erosion is a major challenge that has emerged. A project was announced in the budget to ensure coastal conservation and improvement of infrastructure in the coastal areas. A five-year project with an expenditure outlay of Rs 11,000 crore was announced for the coastal areas.

An important objective of the new LDF government is the eradication of absolute poverty. As a first step, the budget announced the setting up of an expert committee to organise a survey of the households to be targeted and submit recommendations on the policy pathways to achieve the goal in collaboration with the local self-governments.

In conclusion, Kerala’s revised budget for 2021-22 represents both a continuity of the developmental vision of the previous LDF government and some bold new thinking in terms of meeting the new and emerging challenges thrown up by the pandemic. This is in sharp contrast to the complete inaction on the part of the Narendra Modi government, particularly through the second wave of the pandemic. Kerala’s budget is a demonstration of the LDF government’s commitment to people’s welfare. It also begins the efforts to move Kerala’s developmental trajectory to the next level – towards a modern economy and society, which has been aptly termed as “Nava Keralam”.