The budget for 2025-26 comes against the backdrop of three uncertainties. First, the national growth rate is slowing down which could impact the state’s growth performance. Second, global uncertainties loom large on trade, investment and movement of people, which could affect the prospects of the state.
Third, though there exists the possibility of higher awards from the Finance Commission, the divisible pool of resources of the Centre is shrinking due to the higher share of cesses and surcharges. The lengthy budget speech of the finance minister takes into cognizance these factors, but does not provide a clear mitigation strategy.
The budget lays emphasis on outlining four aspects, first a detailed description of the achievements of the current and previous governments, second a consistent complaint of the negligence of the centre towards the state, third, an ambitious growth plan relying on infrastructure development and four continued commitment towards ongoing welfare schemes.
The budget details out a plan for infrastructure development covering all components. The emphasis is on road and seaport development with the anticipation that Vizhinjam port could be scaled up to international standards and would attract large volumes of container traffic.
It is evident that the infrastructure push has an urban bias as cities have received attention while rural hinterlands and hilly regions are not adequately addressed. As the fortunes of Vizhinjam port depend upon global factors, accrual of benefits has an element of uncertainty. The infrastructure-based development strategy is in line with the centre’s template, ignoring possible environmental costs.
A very detailed description of the allocations towards many sectors is provided. While bulk of these has seen significant increase over the previous year, the resource mobilisation required for this is not explained in detail.
This casts shadow on the government’s ability to incur these proposals. On the resource mobilisation front the bid is to boost revenue by a 50% increase in land tax rates expecting an additional `100 crore. A series of tax revisions for contract carriages, private vehicles and electric cars aimed to simplify tax structure, curb tax evasion and increase revenues have been announced.
However, the state has to explore the possibility of increasing GST collections. While Tamil Nadu registered 18%, Karnataka 11%, Telangana 10%, and all India average hit 12%, Kerala recorded only 6% increase in GST collection for the period January 2024 to January 2025.
With a higher share of commitments towards salaries, pensions and public utilities, bold steps are required for increasing the efficiency of resource mobilisation. Red carpet welcome is accorded to investors and entrepreneurs, some of which are realistic, but some of them look over-ambitious.
