Kerala Chief Minister V. D. Satheesan, who also holds the finance portfolio, has tabled a white paper in the Legislative Assembly, laying bare the fiscal condition of the state. Prepared under the stewardship of K. M. Chandrasekhar, former Union Cabinet Secretary and Vice-Chairman of the Planning Board, the document draws a stark and precise portrait of the State’s financial distress. The Chief Minister explained that this was not an indictment of the previous administration but a matter of democratic propriety owed to the public upon the assumption of office by a new government. It mirrors an act from 2016 when the Left Democratic Front government assumed power and the then Finance Minister, Dr T. M. Thomas Isaac, similarly presented the reality of Kerala’s finances to the public through a white paper.
According to the figures detailed in the white paper, Kerala’s aggregate liabilities have escalated to a staggering ₹5.07 lakh crore. Upwards of 77 per cent of the State’s revenue is swallowed by committed expenditure, such as salaries, pensions and interest payments, with interest servicing alone consuming 20.9 per cent of total income. Furthermore, development expenditure stands at a dismal 39.9 per cent, falling drastically short of the national average of 63.5 per cent. Capital expenditure, too, languishes at a mere 1.34 per cent of the GSDP, paling in comparison to the national average of 3.2 per cent. These metrics illuminate a sobering reality: despite a mounting debt burden, capital investments for development have failed to keep pace. This exposes deep-seated flaws in the fiscal planning of the preceding State government: a lion's share of the borrowed capital was diverted not into productive investments but towards bridging the revenue deficit and sustaining day-to-day establishment costs.
It is further contended that the subversion extends beyond mere fiscal planning into the very allocations for social welfare schemes. The plan outlay for SC/ST, OBC, and minority welfare programmes has declined from 9.24 per cent in 2017–18 to a dismal 3.85 per cent in 2025–26. This is a deeply concerning trend, representing a grave injustice meted out to marginalised communities by the Left government. The Left Front is duty-bound to explain this deliberate and systematic reduction in plan allocations year after year from 2017 to 2025–26. The true strength of Kerala lies not merely in its physical infrastructure or industrial might, but in the sustained public investments made over decades in healthcare, education, social security, and the welfare of backward classes. Should these be forsaken, the political and social repercussions will be severe—a cautionary lesson that the incoming administration, at least, must not fail to heed.
In the white paper presented in 2016, Dr T. M. Thomas Isaac declared that the treasury inherited from the Oommen Chandy government was virtually empty. At the time, the solution proposed to ensure that the State’s basic infrastructure development was not derailed by the severe financial crisis was the restructuring of KIIFB to mobilise funds from outside the budget. However, the white paper presented by V. D. Satheesan also serves as a charge sheet against KIIFB, which was once advanced as the remedy. According to the document, nearly half of the expenditure incurred through KIIFB was concentrated in just three districts. KIIFB’s loan liability currently stands at ₹21,000 crore, while a further ₹35,000 crore must still be raised for approved projects. The interest rate on these borrowings is also higher by one to one-and-a-half percentage points. Consequently, revenue streams such as the petroleum cess and motor vehicle tax have been earmarked for servicing KIIFB’s debt repayment. According to the findings of the CAG, KIIFB’s independent revenue sources are insufficient to meet its repayment obligations. In short, under these circumstances, the functioning of KIIFB may have to be comprehensively restructured. Whether such a course will affect the pace of Kerala’s development remains to be seen and may become clearer only when the budget is presented.
While accepting that the reduction in central assistance is a major factor contributing to Kerala's financial crisis, the white paper does not conclude that it is the sole reason. Of the 365 days in the year 2025, the State treasury had to rely on temporary loans from the RBI for 262 days, indicating that the State's liquidity position had been severely strained. Even so, the Centre failed to provide Kerala with its due share, reportedly for political reasons. A shortfall of approximately ₹20,000 crore is expected from the Centre in 2026–27. As the former Finance Minister observed, the effort to secure Kerala's rightful central share must be pursued urgently, irrespective of whether one belongs to the ruling party or the opposition. The new government has a responsibility to ensure that political disagreements do not result in the denial of the State's legitimate entitlements.
There is also the widespread public concern in Kerala about whether the proposals put forward in the white paper will lead to uncontrolled privatisation and the destruction of public sector undertakings. What the State needs is not severe neo-liberal austerity, but the political will to increase revenue by plugging tax leakages while ensuring social security. If the State cannot move forward by avoiding administrative extravagance while preserving welfare schemes, the way forward envisioned by the white paper may lead Kerala into profound social unrest.