Kerala’s 2025-26 budget outlines clear strategies to shrink the fiscal deficit to 3.2% of GSDP (₹45,039 crore) from 3.5% the prior year, blending revenue boosts with spending discipline.
Revenue-Boosting Initiatives
A 50% hike in basic land revenue rates across all slabs, plus steeper road taxes on vehicles over 15 years, aims to unlock ₹100-150 crore in fresh funds from land and court fees. Own tax collections climb to 6.4% of GSDP, fueled by 12% GST growth to ₹37,763 crore and 10% sales tax/VAT rise to ₹33,591 crore.
Expenditure Rationalization
Revenue deficit drops to 1.9% of GSDP (₹27,125 crore) by streamlining pensions and salaries under the Kerala Fiscal Responsibility Act. Total spending rises 11% to ₹1,98,582 crore, offset by 15% non-debt receipts growth to ₹1,53,544 crore, preserving social priorities.
Long-Term Safeguards
GST amnesty for small firms eases compliance, while legal challenges to central borrowing caps continue. The medium-term fiscal framework stresses faster project delivery and revenue-driven balance, avoiding cuts to welfare essentials.
