THE Kerala Budget for 2025-26, presented by Finance Minister KN Balagopal, unfolds a bold and comprehensive vision for the state’s future – a roadmap that combines progressive growth, social justice, and environmental responsibility. In the face of persistent fiscal challenges, the budget emphasizes the importance of people-centric policies, sustainable development, and the resilience of Kerala’s economy. As the state continues to grapple with the complexities of urbanisation, climate change, and shifting demographics, this budget offers a clear path forward – one that ensures prosperity is shared and no one is left behind.

STRENGTHENING KERALA’S FISCAL HEALTH

One of the most promising aspects of the 2025-26 Kerala Budget is the marked improvement in the state’s fiscal health. Kerala has managed to significantly reduce its revenue deficit, from 2.25 per cent in 2021-22 to 1.58 per cent in 2023-24, and its fiscal deficit has also dropped from 4.04 per cent to 2.9 per cent. These achievements are a testament to the government’s prudent fiscal management. Moreover, the state has successfully boosted its own tax revenue by a staggering 70 per cent over the last four years, reaching Rs 81,000 crores in 2024-25.

To further enhance its fiscal position, the budget introduces a series of measures aimed at mobilising additional resources. Court fees are set to be revised, expected to generate Rs 150 crores, while land tax adjustments will bring in an estimated Rs 100 crores. These steps underscore the government’s proactive approach to expanding its revenue base. Additionally, the introduction of an amnesty scheme for GST arrears reflects the state’s desire to provide relief to small traders and businesses, easing their financial burdens.

INFRASTRUCTURE DEVELOPMENT

Infrastructure development takes centrestage in the 2025-26 budget, with significant allocations aimed at transforming Kerala’s transportation, urban development, and digital connectivity sectors. A total of Rs 3,061 crores has been allocated for road and bridge projects, ensuring the continued expansion of Kerala’s transportation network. Notably, metro projects in Kochi, Trivandrum, and Kozhikode, along with the development of the Vizhinjam Port, are expected to reshape the state’s infrastructure, connecting people and places with greater ease.

Urban development, too, receives substantial attention, with Rs 1,986 crores earmarked for waste management, sewage treatment, and urban transformation projects. The Kochi-Sustainable Urban Restructuring Project, for instance, promises to revamp cities into sustainable, eco-friendly spaces. In the realm of digital infrastructure, the budget dedicates Rs 100 crores to enhancing the Kerala Fiber Optic Network (K-FON), ensuring the state remains a frontrunner in the digital age. 

SOCIAL WELFARE

At the heart of Kerala’s development agenda lies its unwavering commitment to social welfare. The state has disbursed Rs 33,210 crores in social security pensions over the past 42 months, providing financial stability to the elderly and vulnerable populations. The budget also promises to clear pending DA arrears for government employees and pensioners, reinforcing the government’s commitment to improving the lives of its workforce.

Housing remains a priority, with the Life Mission programme standing out as a resounding success. Over 4.27 lakh homes have been completed, and another 1.11 lakh are on the way. With Rs 1,160 crores allocated to construct 1 lakh additional houses, the government is making significant strides in providing affordable housing for the marginalised.

Healthcare, a cornerstone of Kerala’s social welfare system, receives a generous Rs 10,431 crores, with Rs 700 crores allocated specifically for the Karunya Arogya Suraksha Padhathi (KASP). Kerala’s free healthcare model continues to set the benchmark, with Rs 6,788 crores spent on providing free treatment to over 25 lakh people in the last three years alone. 

ECONOMIC GROWTH

Kerala is positioning itself as a hub for economic growth, and the 2025-26 budget lays the foundation for a thriving, innovative economy. The tourism sector, a vital contributor to Kerala’s economy, receives Rs 385 crores, with a focus on eco-tourism and MICE (Meetings, Incentives, Conferences, and Exhibitions) tourism projects. The K-Homes initiative, which repurposes unoccupied homes for affordable tourist accommodations, is a prime example of the state’s creative approach to expanding the tourism industry. 

In the technology space, the budget allocates Rs 517 crores to develop new IT parks and corridors in Kannur and Kollam. Kerala is also making a conscious push to embrace emerging technologies like AI, blockchain, and robotics, with Rs 10 crores set aside for a GPU cluster in Thiruvananthapuram. The state is positioning itself as a leader in the knowledge economy, fostering innovation and creating a dynamic tech ecosystem.

Small and medium enterprises (SMEs) and startups also receive significant support, with Rs 1,831 crores allocated to industrial development. The Chief Minister’s Entrepreneurship Promotion Scheme, for example, aims to nurture 500 small enterprises annually, creating jobs and spurring innovation in Kerala.

ENVIRONMENTAL SUSTAINABILITY

Environmental sustainability is a core focus of the Kerala Budget. In response to the devastation caused by the Mundakkai-Chooralmala landslides, Rs 750 crores has been allocated for rehabilitation efforts, prioritising disaster resilience. The Green Hydrogen Valley project, a pioneering initiative leveraging Kerala’s abundant resources, receives Rs 5 crores, marking the state’s commitment to green energy solutions. Additionally, the expansion of solar power projects and battery energy storage systems (BESS) underscores Kerala’s drive to increase its renewable energy capacity. 

AGRICULTURE AND RURAL DEVELOPMENT

Agriculture remains a critical sector, and the 2025-26 budget allocates Rs 727 crores to strengthen this vital industry. A comprehensive rice development program will receive Rs 150 crores, while Rs 30 crores will support Kerala’s ambition to become a hub for high-value horticulture. The fishing sector also benefits, with Rs 295 crores earmarked for the renovation of fishing harbors and the creation of a global dairy village in Kannur. 

Rural development gets a substantial Rs 7,098 crores, with significant portions allocated to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). These investments aim to uplift rural communities and ensure that economic opportunities reach every corner of the state.

The 2025-26 budget places a strong emphasis on uplifting vulnerable communities. With Rs 3,236 crores allocated for Scheduled Caste development and Rs 1,020 crores for Scheduled Tribe welfare, the government is making strides in addressing the needs of these historically marginalised groups. Programmes focused on health, education, and livelihood are central to these allocations. Additionally, minorities and women’s welfare receives considerable support, with Rs 105 crores and Rs 706 crores dedicated to their social security programmes, respectively.

Despite its progressive vision, Kerala continues to face fiscal challenges due to reduced central allocations and borrowing limits. The government has approached the Supreme Court to address these constraints and secure the necessary funds for its development agenda. Additionally, there are concerns about delays in the timely execution of projects, especially in infrastructure. To overcome this, the state plans to focus on improving project implementation efficiency.

The Kerala Budget for 2025-26 represents a progressive, people-first vision that balances growth, sustainability, and inclusivity. From strengthening fiscal health to investing in infrastructure, social welfare, and green energy, the budget lays out an ambitious path for the future. While fiscal constraints and implementation challenges remain, the government’s determination to build a resilient, equitable, and sustainable economy is evident. With a focus on human capital, environmental sustainability, and social justice, Kerala is poised to emerge as a leader in progressive development in the years to come.