Kerala’s debt has not doubled over the last five years – and that’s a first in three decades, according to Finance Minister K. N. Balagopal. While the state’s debt nearly doubled every five years since 2010, the current pace has slowed down.
Back in 2010–11, the state’s total debt stood at ₹78,673 crore. It jumped to ₹1.57 lakh crore by 2015–16 and nearly ₹2.97 lakh crore by 2020–21. Going by this trend, it should have hit the ₹6 lakh crore mark by 2025–26. But this time, the debt is expected to stay around ₹4.65 lakh crore. That’s a sizeable deviation from the pattern.
According to the Minister, the slowdown isn’t accidental—it’s because Kerala wasn’t allowed to borrow as much as it was entitled to.
As per the existing borrowing norms, the state can take loans up to 3.5% of its Gross State Domestic Product (GSDP). But in 2022–23, the actual borrowing was only 2.5%, and in 2023–24 it was 2.99%. The state argues that it was denied permission to borrow the full eligible amount by the Centre, despite repeated requests.
The Minister hit out at the growing claims that Kerala is heading into a debt trap. He argued that the borrowings are proportionate to the state’s economic growth and are fully compliant with the Fiscal Responsibility and Budget Management (FRBM) Act. All loans are taken with due approvals from the Centre and Reserve Bank of India, he added.
The State Economics and Statistics Department data also suggests that Kerala’s debt-to-GSDP ratio has actually declined since 2020–21.
A major chunk—₹3,300 crore—was chopped off Kerala’s borrowing allowance this year. Because the Centre flagged the state’s loan guarantees for public sector undertakings.
Kerala currently stands guarantee for loans totalling ₹80,000 crore. Under new conditions, states are required to park 5% of the guarantee amount in a special “Guarantee Redemption Fund”. Kerala didn’t do that. So, as per the rulebook, its borrowing cap was reduced by 0.25% of the GSDP—amounting to ₹3,300 crore.
So far this year, the Centre has allowed Kerala to borrow ₹29,529 crore till December.
On top of that, ₹956.16 crore was deducted from Kerala’s share of the Integrated Goods and Services Tax (IGST). The Centre claimed this was due to an over-allocation of IGST in previous settlements. But the state says it hasn’t received any proper data or clarification to back that claim.
Balagopal pointed fingers back at the Centre, saying it’s not just Kerala carrying debt. The Union Government’s total debt stands at a massive ₹155 lakh crore—about 58.1% of its GDP.
As for the fiscal deficit? It was 5.6% in 2023–24. The Centre claims it will bring that down to 4.4% in 2024–25, but past trends suggest the actual figure might end up higher.
Kerala will distribute two pending instalments of welfare pensions starting from May 25. A total of ₹1,650 crore has been allocated for this, covering the May pension and one backlog instalment. Each pensioner will receive ₹3,200. With this, only two instalments remain unpaid out of five.
As for new borrowings, Kerala has raised ₹5,000 crore so far in the current financial year—₹2,000 crore in April and ₹3,000 crore in May. According to the state’s budget estimates, total debt is expected to reach ₹4.81 lakh crore by the end of this fiscal.
