Kerala Assembly Erupts Over Fiscal Crisis Allegations; Government Defends Welfare Spending

The Kerala Assembly erupted in a heated debate on Monday as the ruling Left Democratic Front (LDF) and the Congress-led United Democratic Front (UDF) clashed over the state’s fiscal health. Finance Minister K N Balagopal staunchly defended the government’s financial management, asserting that welfare and development programmes have continued unabated despite challenges, in response to an adjournment motion by UDF MLA Mathew Kuzhalnadan alleging a "financial crisis" and derailment of welfare initiatives.

Balagopal rejected claims of mismanagement, highlighting significant revenue growth under the LDF’s tenure. He noted that the state’s tax revenue surged from Rs 47,660 crore to Rs 76,682 crore, with non-tax revenue rising by over Rs 16,000 crore from Rs 7,377 crore. He emphasised that fiscal and revenue deficits have been reduced, enabling expenditures like Rs 42,847 crore on social welfare pensions and a 50% increase in capital expenditure. Additionally, Rs 1,000 crore was allocated to local self-government institutions outside budget plans. Balagopal criticised the central government’s reduced allocations, warning that such cuts threaten fiscal federalism, yet insisted Kerala has not scaled back any welfare programmes.

The opposition, led by V D Satheesan, accused the LDF of plunging Kerala into an "unprecedented financial crisis" due to poor tax collection and treasury restrictions. Satheesan alleged that fiscal mismanagement has led to tax evasion and shady business practices, deterring genuine taxpayers and risking future revenue. Kuzhalnadan pointed to a 2.52% dip in GST growth for 2024-25, claiming the government’s restrictive measures and failure to study external factors—such as recent GST reforms, US tariff hikes, and H-1B visa fee increases—have exacerbated economic woes.

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CPI(M) legislator P Nandakumar countered, accusing the Congress of hypocrisy for criticising treasury regulations when it had imposed similar measures during its rule. He reiterated that no welfare programmes have been compromised. The debate reflects broader tensions over Kerala’s economic strategy, with the LDF emphasising resilience and the UDF highlighting perceived governance failures, as both sides navigate the state’s complex fiscal landscape amid reduced central support.

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