Kerala Governor Flags Centre's Fiscal Squeeze In Policy Address, Lauds State's Decade Of Growth
In the policy address, Arlekar said Centre has withheld Rs 6,000 crore, more than half of the required funds, without justification in the last quarter.
Published : January 20, 2026 at 2:41 PM IST
Thiruvananthapuram: Launching a blistering attack on the Union Government’s fiscal policies while robustly defending the state’s economic management, Kerala Governor Rajendra Vishwanath Arlekar opened the 16th session of the 15th Kerala Legislative Assembly on Tuesday.
In a policy address that effectively set the tone for the upcoming election season, the Governor highlighted Kerala's strides in social development over the last decade, even as he accused New Delhi of undermining federal principles through a "financial blockade."
Addressing the House, Arlekar underscored the state's landmark achievement of near-total eradication of extreme poverty and drew attention to the health indices, noting that the infant mortality rate remains lower than that of many developed nations. The Governor presented a report card of the government’s economic performance over the last 10 years, stating that the Gross State Domestic Product (GSDP) had surged from Rs 5.26 lakh crore to Rs 12.49 lakh crore, with per capita income nearly doubling in the same period.
Rebutting critics who attribute the state’s financial crunch to profligacy, he cited Comptroller and Auditor General (CAG) data to point out that 56.9 percent of borrowings in the 2023-24 fiscal were utilised for capital expenditure. Furthermore, the government has successfully brought down the debt-to-GSDP ratio from a pandemic-high of 38 percent to a projected 34 percent by the end of the current fiscal.
The core of the policy address, however, was a scathing critique of the Central government’s approach to fiscal federalism. The Governor argued that the Centre’s decision to classify borrowings by entities like Kerala Infrastructure Investment Fund Board (KIIFB) and the Pension Company as state debt has severely curtailed Kerala’s borrowing limits, thereby stalling development and welfare initiatives. He quantified the impact of these policies, noting that the state has been deprived of approximately Rs 17,000 crore in the current year alone due to cuts in borrowing limits and changes in Integrated Goods and Services Tax (IGST) devolution.
"The Centre has withheld nearly Rs 6,000 crore, more than half of the required funds, without sufficient justification during the crucial final quarter of the financial year," Arlekar said. He also flagged the reduction in Central assistance for the rural employment guarantee scheme from 100 to 60 percent, alongside a cut in guaranteed workdays, as a move that has disproportionately affected the rural poor.
Arlekar's address further highlighted the adverse impact of global trade shifts, specifically US import duties, which have caused a loss of Rs 2,500 crore to Kerala's export-oriented sectors like rubber, spices, and marine products. The Governor affirmed the state's resolve to explore all constitutional and legal avenues to secure its fiscal rights.
On the developmental front, the Governor painted a picture of a "resilient Kerala model." He highlighted the distribution of over 4.1 lakh land titles in the last decade, bringing the state closer to its goal of housing for all. The address also touched upon the uninterrupted power supply maintained over the last 10 years and the strategic importance of the Vizhinjam International Seaport, which is poised to integrate Kerala into global maritime trade. Welfare measures, including the disbursement of Rs 4,500 crore under the Karunya benevolent health scheme and the hike in honorarium for Asha workers, were also detailed.
The current session, which is the final gathering of the second Pinarayi Vijayan government before the Assembly elections, is scheduled to last 32 days. While the immediate agenda involves passing a Vote on Account, the session is expected to be stormy. The Opposition is likely to weaponise issues ranging from the Sabarimala controversy and gold smuggling allegations to the specifics of the ‘Punrarjani’ case, setting the stage for a heated political showdown in the run-up to the polls.
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