Kerala under financial pressure due to curtailments by Centre: Guv''s address

Thiruvananthapuram, Jan 20 (PTI) The budget session of the Kerala Assembly commenced on Tuesday with Governor Rajendra Vishwanath Arlekar reading out the Left government’s policy address, which accused the union government of curtailing the state’s finances and pushing it into "severe fiscal stress".

The policy address also criticised the Centre for intervening in subjects within states’ domains, excessive centralisation of power, and leaving bills passed by state legislatures pending for long periods.

Arlekar said that despite Kerala’s social and institutional achievements, the state continues to face "severe financial stress due to a series of adverse union government actions that undermine the constitutional principles of fiscal federalism." The "adverse actions" mentioned in the policy document include the cutting by half, "without proper justification", of Rs 12,000 crore that the state was to receive in the final quarter of the 2025-26 financial year.

"At the same time, amounts due to Kerala from the Government of India under central schemes—pending up to September 2025, including arrears from previous financial years—stand at Rs 5,650.45 crore. These curtailments have placed severe pressure on the state’s finances at a critical point in the financial year," the governor said, reading from the policy document.

Other challenges cited include the new rural employment act, Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) that replaced MGNREGA. Central contribution under the new act has fallen from 100 per cent to 60 per cent; recent GST rationalisation, which has caused an estimated revenue loss of over Rs 8,000 crore; and the impact of the US’s reciprocal tariff measures on the state’s export-oriented sectors.

Further, restrictions on the state’s borrowing limits and adjustments to the Integrated Goods and Services Tax this year alone have led to Kerala being denied Rs 17,000 crore, he said.

Additionally, the state suffered a further "loss" of Rs 4,250 crore due to the Gross State Domestic Product (GSDP) methodology, which deviates from the accepted recommendations of the 15th Finance Commission.

Arlekar said these fiscal constraints affect all sections of society by placing pressure on expenditure in health, education, welfare programmes, agriculture, and employment.

The document also noted that Kerala’s share of tax devolution has steadily declined despite the state’s social and demographic achievements, including population control.

It pointed out that "tax devolution and Finance Commission grants are constitutional entitlements of states and not acts of charity, and any pressure on constitutional bodies entrusted with this task undermines federal principles," a section which Arlekar did not read aloud.

He further said the Kerala government has rejected claims that its financial stress is due to extravagance, noting that it has strengthened its fiscal position by increasing its own revenue and "rationalising" expenditure.

Despite the "cumulative constraints" imposed by the union government, the state has continued to invest in welfare measures, infrastructure development, industrial promotion, and employment generation, Arlekar said.

"Kerala has demonstrated that disciplined governance and productive public investment can coexist with economic dynamism," he said, adding that the state’s economy has grown on average by around 12 per cent annually, more than doubling its economic output in the last decade.

The governor also detailed the government’s achievements across agriculture, health, education, and infrastructure development, as well as initiatives being taken to further strengthen these sectors.

He said Vizhinjam Port will act as a key catalyst for port-led and logistics-driven industrialisation, enabling the development of high-value port-industrial zones.

Government initiatives mentioned include enhancing remuneration for care workers, increasing the honorarium of ASHA workers, raising wages for Anganwadi workers and helpers, planning a dedicated 'woman in agriculture' project, eliminating extreme poverty, implementing a semi-high-speed rail project in mission mode, and raising the monthly welfare pension to Rs 2,000.

To safeguard agricultural livelihoods, the government has increased the support price for rubber from Rs 150 per kg to Rs 200 per kg, effective November 2025, and has requested the Centre to raise it to Rs 250 per kg.

The government has also planned to distribute a 'nativity card' to foster a sense of pride in being a Keralite alongside being an Indian.

As he concluded the address, the governor said the government remains deeply committed to the constitutional values and ethos of the nationalist movement, namely democracy, secularism, federalism, and socialism.

"My government has taken all possible steps to defend these values, which form the basic structure of our Constitution," he said.

The 16th session of the Assembly will meet for 32 days from January 20 to March 26, according to the legislative calendar.

Discussions on the motion of thanks to the Governor’s address are scheduled for January 22 and 27.

Kerala Finance Minister K N Balagopal will present the Budget for the 2025-26 financial year in the House on January 29. PTI HMP SSK HMP SSK ADB