Kerala Faces ₹5.07 Lakh Crore Debt Burden, Fiscal Structure Under Severe Strain: CM Tables White Paper In Assembly
Kerala is facing mounting financial pressure with outstanding liabilities touching ₹5.07 lakh crore, according to a White Paper on the State’s fiscal health tabled in the Kerala Legislative Assembly on Thursday.
The document, presented by Chief Minister V.D. Satheesan, paints a concerning picture of the State’s finances, warning that Kerala’s fiscal structure is under “serious and growing strain” despite its long-standing social development achievements.
Titled “Kerala’s Fiscal Health: A Status Report,” the White Paper highlights several challenges confronting the State economy, including a high debt burden, rising committed expenditure, increasing interest payments, poor tax revenue performance, and concerns over the functioning and project distribution of the Kerala Infrastructure Investment Fund Board (KIIFB).
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According to the report, Kerala currently carries outstanding liabilities of ₹5.07 lakh crore. In addition, committed expenditures account for 77% of the State’s Total Revenue Receipts (TRR), while interest payments alone consume 20.9% of TRR.
The report notes that these figures significantly limit the government’s ability to spend on development projects and public services.
The White Paper states that Kerala’s committed expenditure burden is far higher than the national average.
While the all-India average stands at 46.1%, Kerala’s figure is more than one-and-a-half times higher. As a result, only a small portion of government revenue remains available for sectors such as education, healthcare, infrastructure development, welfare programmes and support for local self-government institutions.
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One of the most striking findings in the report relates to capital expenditure. Kerala’s capital expenditure stands at just 1.3% of its Gross State Domestic Product (GSDP), making it one of the lowest among Indian states.
This comes despite Kerala running one of the highest fiscal deficits in the country. The report argues that the State has failed to follow the basic economic principle of borrowing for productive investments that generate future growth and revenue.
“Borrow to invest, growth will repay” is described as a fundamental principle of public finance.
However, the White Paper notes that Kerala has violated this principle on a large scale, weakening the State’s long-term growth-generating capacity and placing greater pressure on public finances.
The report also raises concerns about the performance of the State’s own tax revenues.
Goods and Services Tax (GST), which forms a major component of Kerala’s own tax revenue, has reportedly underperformed in recent years. The White Paper points out that Kerala’s GST growth and collection performance remain below the all-state average, creating additional stress on the State’s revenue position.
Another major focus of the report is the Kerala Infrastructure Investment Fund Board (KIIFB), which was established to finance large-scale infrastructure projects.
According to the White Paper, fiscal stress has been compounded by what it describes as “parallel governance structures” such as KIIFB. The report claims that these structures have diverted revenue streams while simultaneously creating substantial future liabilities for the government.
The White Paper also questions KIIFB’s project prioritisation and distribution patterns across districts. According to the data presented, Kannur district alone accounts for more than 20% of the total approved project amounts and around 19% of the funds released through KIIFB. Thiruvananthapuram accounts for approximately 17% of approved projects and released funds, while Ernakulam receives around 11%.
Together, these three districts account for nearly half of the total approved project allocations and payments released under KIIFB. The report argues that such concentration raises serious questions regarding regional balance and equitable distribution of infrastructure investments across Kerala’s districts.
The White Paper further notes that Kerala’s current fiscal situation leaves very limited room for developmental spending.
With a significant share of revenue already committed towards salaries, pensions, interest payments and other mandatory obligations, the State faces increasing difficulty in financing new projects and expanding public services.
