A decade-long fiscal trail — from ₹1.57 lakh crore to nearly ₹4.89 lakh crore — and the off-budget borrowings the previous government never disclosed in its budgets.
Kerala debt moved to the centre of a political and fiscal reckoning on Thursday when Chief Minister V D Satheesan, who also holds the Finance portfolio, tabled a white paper on the state’s financial condition in the 16th Kerala Legislative Assembly. Prepared by a special committee headed by former Cabinet Secretary Dr K M Chandrasekhar, the document covers the period from 2016 to 2026 — spanning both terms of the previous Left Democratic Front government — and attempts to lay bare what the new United Democratic Front administration inherited when it took office in May 2026.
The sheer scale of debt accumulation is the centrepiece. Kerala’s total outstanding debt stood at roughly ₹1,57,370 crore when the first Pinarayi Vijayan government took charge in 2016. By the budget estimates for 2025-26, that figure had swelled to approximately ₹4,88,910 crore — a rise of more than 210 per cent over a decade. To put that in perspective, the Comptroller and Auditor General’s latest state finance report noted that overall liabilities, including off-budget items, grew at an average annual rate of 11.61 per cent between 2019-20 and 2023-24 alone.
What sharpens the concern is the gap between what appeared in Kerala’s annual budgets and what existed off the books. The CAG flagged that the state government had not disclosed off-budget borrowings of ₹20,041 crore through the Kerala Infrastructure Investment Fund Board and another ₹12,901 crore through Kerala Social Security Pension Limited in its budgets, leading to an understatement of liabilities by nearly ₹32,942 crore. That hidden sum is striking: it is almost identical to the state’s entire net borrowing ceiling of roughly ₹33,597 crore for 2024-25, effectively meaning the undisclosed debt was as large as one full year’s permitted borrowing.
KIIFB itself now faces a repayment obligation of around ₹16,600 crore over the next five years, according to recent government estimates. The new administration has signalled it will bring KIIFB’s expenditure within the state budget and restrict the body to revenue-generating projects — a potential structural shift that could ease the borrowing-ceiling friction with the Centre but would also curtail the kind of large-scale infrastructure spending that defined the previous decade. A separate white paper specifically on KIIFB is also expected.
The previous government contested this narrative before leaving office. It pointed to the debt-to-GSDP ratio declining from 38.47 per cent in 2021 to an estimated 33.44 per cent by 2025-26, citing CAG data to argue that Kerala’s debt remained within manageable limits relative to other states. However, the CAG’s own numbers tell a more nuanced story: overall liabilities, including off-budget items, stood at 37.84 per cent of GSDP for 2023-24 — above the 33.70 per cent target set by the state’s own Fiscal Responsibility Act.
For fiscal watchers and holders of Kerala’s state development loans, the tension between these two readings of the same data is the real story. Revenue deficit for 2026-27 is projected at ₹34,587 crore, and the fiscal deficit at 3.40 per cent of GSDP. Add to that ongoing pension liabilities — the previous government had itself acknowledged arrears affecting over 50 lakh beneficiaries — and the incoming administration faces an exceedingly narrow fiscal corridor in which to honour its own electoral commitments. The Assembly session saw immediate pushback from the opposition, with former Finance Minister K N Balagopal alleging that confidential documents were shared with outsiders, a charge the Chief Minister denied. The political battle over Kerala debt is only beginning; for those tracking state-level fiscal risk, the white paper is less an answer and more a map of the questions ahead.
Disclosure:. This article is journalism and educational commentary, not investment advice. The author is not a SEBI-registered Research Analyst. Figures should be independently verified against official filings before any financial decision.
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