Kerala State Budget 2026-27 Analysis

Key Highlights

• Kerala's revised full budget for FY2026-27, presented on 19 June 2026, targets total expenditure of Rs 2,27,567 crore (excluding debt repayment) — 18% higher than the 2025-26 revised estimate of Rs 1,92,456 crore.
• Receipts excluding borrowings are pegged at Rs 1,71,162 crore, with revenue receipts of Rs 1,69,646 crore — a 24% rise over the 2025-26 revised estimate — including own tax revenue of Rs 99,002 crore and own non-tax revenue of Rs 21,356 crore.
• The fiscal deficit is budgeted at Rs 56,405 crore, or 3.5% of GSDP, narrowing from 3.8% (Rs 53,950 crore) in the 2025-26 revised estimate but still above the 16th Finance Commission's recommended 3% ceiling.
• The revenue deficit is set at Rs 35,355 crore (2.2% of GSDP), down from Rs 36,889 crore (2.6% of GSDP) in 2025-26 RE.
• Capital outlay in the revised budget rises 26% year-on-year to Rs 19,718 crore from Rs 15,670 crore, though it remains only about 1.2% of the projected GSDP of Rs 16,29,073 crore.
• The June revision marked down the January 2026 budget's receipt estimates by about Rs 20,500 crore and reset the annual plan outlay from Rs 35,750 crore to Rs 30,370 crore, after assumed central transfers did not materialise.
• Education remains the largest spending sector at Rs 30,525 crore, followed by social welfare and nutrition at Rs 19,605 crore and health and family welfare at Rs 12,078 crore.
• The revised budget's flagship Mission Samudra maritime programme receives Rs 400 crore over five years, alongside Rs 200 crore for an Aviation Logistics Hub.
• The Oommen Chandy Health Insurance Scheme announced in the June budget offers cover of up to Rs 25 lakh per family, seeded with an initial allocation of Rs 10 crore.
• Free KSRTC bus travel for women is funded with Rs 600 crore, ASHA workers' monthly honorarium rises from Rs 9,000 to Rs 12,000, and social security pensions continue at Rs 2,000 a month within a Rs 14,500 crore pension commitment.
• Committed expenditure — salaries of Rs 52,561 crore, pensions of Rs 35,439 crore and interest payments of Rs 34,376 crore — totals Rs 1,22,376 crore, absorbing 72% of the state's revenue receipts.
• The White Paper tabled on 4 June 2026 put accumulated public debt at about Rs 5.07 lakh crore, with a further Rs 87,012 crore of KIIFB and Kerala Social Security Pensions Ltd liabilities; PRS estimates outstanding liabilities at about 34% of GSDP in 2026-27.