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  • Kerala Budget Analysis 2025-26

Kerala Budget Analysis 2025-26

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The Finance Minister of Kerala, Mr. K. N. Balagopal, presented the Budget for the state for the financial year 2025-26 on February 7, 2025.

Budget Highlights

  • Kerala’s Gross State Domestic Product (GSDP) for 2025-26 (at current prices) is projected to be Rs 14,27,145 crore, amounting to growth of 12% over the revised estimates for 2024-25.

  • Expenditure (excluding debt repayment) in 2025-26 is estimated to be Rs 1,98,582 crore, an 11% increase over the revised estimates of 2024-25.  In addition, debt of Rs 1,14,961 crore is estimated to be repaid by the state.

  • Receipts (excluding borrowings) for 2025-26 are estimated to be Rs 1,53,544 crore, an increase of 15% as compared to the revised estimate of 2024-25.  

  • Revenue deficit in 2025-26 is estimated to be 1.9% of GSDP (Rs 27,125 crore), as compared to a revenue deficit of 2.3% of GSDP (Rs 29,196 crore) at the revised estimate stage in 2024-25.  

  • Fiscal deficit for 2025-26 is targeted at 3.2% of GSDP (Rs 45,039 crore).   In 2024-25, as per the revised estimates, fiscal deficit is expected to be 3.5% of GSDP, marginally higher than the budgeted 3.4% of GSDP.

Policy Highlights                                                         

  • Land Revenue: Basic tax rates on land will be increased by 50%.

  • Vehicle tax: Road tax on two-wheelers, three-wheelers, and private cars older than 15 years will be increased by 50%.  The life-time tax of private electric cars will be fixed relative to their cost. 

  • Cooperative Housing: A cooperative housing project to create affordable housing in rural and urban areas has been announced.  At least one lakh houses are aimed to be built in the next two years.

  • Coastal Development: A special package for coastal area development has been announced.  In the first phase, Rs 100 crore has been allocated for geo-tube off-shore break water projects.

  • Green Hydrogen Valley: A project to generate hydrogen using renewable sources will be piloted with an initial outlay of five crore rupees.

Kerala’s Economy

  • GSDP:  In 2023-24, Kerala’s GSDP (at constant prices) is estimated to grow by 6.5% over the previous year.  In comparison, India’s GDP is estimated to grow by 8.2% in 2023-24.

  • Sectors: In 2023-24, agriculture, manufacturing, and services sectors are estimated to contribute 10%, 24%, and 66% of Kerala’s economy, respectively (at current prices).

  • Per capita GSDP:  In 2023-24, Kerala’s per capita GSDP (at current prices) is estimated to be Rs 3,17,723, an increase of 11% over 2022-23.  In 2023-24, India’s per capita GDP is estimated to increase by 9% over 2022-23 to Rs 2,11,725.

Figure 1: Growth in Kerala’s GSDP at constant prices (2011-12)
  image

Note: These numbers are as per constant prices (2011-12) which implies that the growth rate is adjusted for inflation.
Sources: MoSPI; PRS.

Budget Estimates for 2025-26

  • Total expenditure (excluding debt repayment) in 2025-26 is targeted at Rs 1,98,582 crore.  This is an increase of 11% from the revised estimate of 2024-25.  This expenditure is proposed to be met through receipts (excluding borrowings) of Rs 1,53,544 crore and net borrowings of Rs 40,848 crore.  Total receipts for 2025-26 (other than borrowings) are expected to register an increase of 15% over the revised estimate of 2024-25.
  • The state estimates a revenue deficit of 1.9% of GSDP (Rs 27,125 crore) in 2025-26, as compared to a revenue deficit of 2.3% of GSDP as per revised estimates for 2024-25.  
  • Fiscal deficit for 2025-26 is targeted at 3.2% of GSDP (Rs 45,039 crore), lower than the revised estimates for 2024-25 (3.5% of GSDP).  In absolute terms, fiscal deficit is estimated to increase in 2025-26 (Rs 45,039 crore) over the revised estimates for 2024-25 (Rs 44,747 crore).  Due to the 12% growth estimated in GSDP, the fiscal deficit for 2025-26 as a percentage of GSDP is estimated to be less than the revised estimate for 2024-25. 

Table 1: Budget 2025-26 - Key figures (in Rs crore)

Items

2023-24 Actuals

2024-25 Budgeted

2024-25 Revised

% change from BE 24-25 to RE 24-25

2025-26 Budgeted

% change from RE 24-25 to BE 25-26

Total Expenditure

2,33,872

2,55,386

2,87,997

13%

3,13,543

9%

(-) Repayment of debt

74,366

71,058

1,09,226

54%

1,14,961

5%

Net Expenditure (E)

1,59,507

1,84,327

1,78,772

-3%

1,98,582

11%

Total Receipts

2,29,603

2,46,845

2,83,856

15%

3,09,353

9%

(-) Borrowings

1,04,355

1,07,047

1,49,832

40%

1,55,809

4%

of which central capex loans*

0

100

2,600

2500%

2,750

6%

Net Receipts (R)

1,25,248

1,39,798

1,34,025

-4%

1,53,544

15%

Fiscal Deficit (E-R)

34,258

44,529

44,747

0%

45,039

1%

as % of GSDP

3.0%

3.4%

3.5%

 

3.2%

 

Revenue Deficit

18,140

27,846

29,196

5%

27,125

-7%

as % of GSDP

1.6%

2.1%

2.3%

 

1.9%

 

Primary Deficit

7,272

15,835

15,008

-5%

13,215

-12%

as % of GSDP

0.6%

1.2%

1.2%

 

0.9%

 

GSDP

11,46,109

13,11,437

12,75,412

-3%

14,27,145

12%

Note: BE is Budget Estimates; RE is Revised Estimates.  *Central government has been providing 50-year interest-free loans to state governments for capital expenditure since 2020-21.  These loans are excluded from the calculation of the state's borrowing ceiling.
Sources: Annual Financial Statement, Kerala Budget Documents 2025-26; PRS.

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