The Kerala Legislative Assembly recently erupted in a heated debate as the Opposition United Democratic Front (UDF) sharply criticized the Left Democratic Front (LDF) government’s handling of the state’s finances. The UDF accused the government of severe fiscal mismanagement, leading to an impending financial crisis. In response, Finance Minister K.N. Balagopal firmly defended the administration, arguing that Kerala’s economy is progressing well despite financial constraints imposed by the Central government’s policies.
The discussion on Kerala’s financial stability was initiated in the Assembly following the government’s agreement to address an adjournment motion put forth by Mathew Kuzhalnadan of the Congress party. The motion sought to highlight the economic repercussions of recent treasury restrictions.
The Opposition painted a grim picture, asserting that the government’s failure to enhance tax collection, broaden the tax base, and curb evasion was pushing the state toward an unprecedented financial disaster. They highlighted that tax revenues from key sectors like gold and liquor had stagnated, even as prices for these commodities soared. Furthermore, the UDF alleged that the government was struggling to clear significant arrears, including contractors’ bills and even scholarships for students from Scheduled Caste and Scheduled Tribe categories.
“The primary responsibility of any state is effective tax collection. Without it, welfare and development initiatives cannot be sustained. On this front, you have demonstrably failed,” declared Leader of Opposition V.D. Satheesan to the government. Both Satheesan and Kuzhalnadan presented figures indicating a sharp decline in Goods and Services Tax (GST) growth, from 6.59% in 2023-24 to a mere 4.07% in 2024-25.
Satheesan elaborated on the revenue shortfall, noting that Kerala’s General Sales Tax (KGST) revenue saw an increase of only ₹454 crore compared to the previous fiscal year, with growth dropping from 3.46% to 1.66%. He pointed out the astonishing stagnation in gold tax revenues, even though the price per sovereign had dramatically increased from ₹4,800 in the pre-GST era to ₹80,000 currently. Satheesan further slammed the State GST department as “utterly inefficient,” citing widespread tax evasion.
In a strong rebuttal, Finance Minister Balagopal acknowledged the difficulties but firmly laid the blame on the Central government’s fiscal policies. He explained that the lower GST growth rate in 2024-25 was primarily due to the Centre withholding ₹965 crore from the state’s Integrated GST (IGST) share, citing a shortfall in the overall IGST balance.
Balagopal also challenged the Opposition’s claim that Kerala was ensnared in a “debt trap.” He cited the latest report from the Comptroller and Auditor General (CAG) on state finances, which placed Kerala among states with a healthy debt-to-GSDP ratio, well below 25%. He further argued that if the general trend of state debt doubling every five years were applied, Kerala’s debt should have reached ₹6 lakh crore, yet it remained significantly lower, at under ₹4.7 lakh crore.
Deputy Opposition Leader P.K. Kunhalikutty, however, urged the government to adopt a more “realistic” approach to fiscal management. He highlighted that other southern states were achieving much faster economic growth than Kerala. Kunhalikutty also criticized the LDF government for not curbing what he described as “unnecessary spending and extravagance,” especially given the state’s challenging financial situation.