The Kerala government has tabled a White Paper on the state’s finances, revealing a severe fiscal stress situation with outstanding liabilities of ₹5.07 lakh crore and highlighting growing concerns over rising debt, expenditure commitments, and declining revenue flexibility. The report was presented in the Kerala Assembly on Thursday by Chief Minister V.D. Satheesan, outlining both the current financial position and the challenges ahead.

The White Paper stated that committed expenditure now consumes nearly 77 per cent of the state’s total revenue receipts, leaving limited fiscal space for development spending. It further noted that interest payments alone account for around 21 per cent of revenue receipts, underscoring the heavy burden of past borrowings on the state’s present financial stability.

According to the report, Kerala’s fiscal stress has been intensified by multiple structural factors, including declining central transfers, the end of GST compensation and revenue deficit grants, weak private investment growth, and increasing expenditure commitments. It also observed that the state’s capital expenditure remains low at just 1.3 per cent of Gross State Domestic Product (GSDP), despite relatively high fiscal deficits, indicating an imbalance between borrowing and productive investment.

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The document highlighted serious treasury constraints, stating that Kerala has frequently depended on Reserve Bank of India mechanisms such as Ways and Means Advances almost every year since 2015. In 2025 alone, the state reportedly relied on such advances for 262 days and remained in overdraft for 84 days, reflecting persistent cash flow pressures and short-term borrowing dependence.

The White Paper also drew attention to accumulated payment arrears amounting to ₹48,733 crore, including pending Dearness Allowance and Dearness Relief liabilities, along with dues owed to banks and contractors. It further pointed to rising losses in public sector enterprises, with accumulated losses increasing sharply from ₹31,571 crore in 2021–22 to ₹78,851 crore in 2024–25, with entities such as KSRTC, KSSPL and Kerala Water Authority accounting for the majority of losses.

The report concluded by recommending structural reforms, including improved revenue mobilisation, efficiency upgrades in public sector enterprises, and a shift from production-based subsidies to targeted consumption-based welfare support. It also cautioned that balancing welfare commitments with fiscal correction will remain a key challenge for the state, as Kerala continues to face pressure from high debt levels and slowing revenue growth.

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