Union Budget 2025: 'Major letdown' says Kerala; CM Vijayan slams Centre for 'punishing' Kerala for its progress

Kerala once again faces a major letdown with the Union budget. The state had sought a ₹24,000 crore package to address its financial strain, exacerbated by various factors, including the drop in the central allocations to natural disasters.

While Kerala did not anticipate a mega package, it had hoped for relief measures for those affected by the Mundakkai and Chooralmala disasters and a dedicated package for Vizhinjam Port’s development. However, neither the state’s concerns nor its demands found any mention in Finance Minister Nirmala Sitharaman’s eighth budget.

State Finance Minister K.N. Balagopal expressed strong disappointment, stating that the budget prioritizes politically significant regions while failing to ensure equitable treatment for all states. Kerala’s ambitious infrastructure projects, including Silver Line Rapid Transit, and the Angamaly–Sabari, Nilambur–Nanjangud, and Thalassery–Mysuru rail lines, found no mention in the Union budget. The state had also hoped for support to tackle climate change-induced disasters, coastal erosion, sea encroachment, cancer care, paddy procurement, the minimum support price for rubber, and for the higher education sector. Additionally, Kerala had sought a ₹1,000 crore package to address human-wildlife conflicts, but this, too, was overlooked.

Balagopal stated that while the relief package for the Wayanad disaster was fully justified, the central government chose to overlook it. "Vizhinjam, the largest export promotion scheme in India over the past 20 years, was also ignored, with no special financial allocation,” he said. He further remarked that the 2025 budget focuses solely on investment, exports, and development while disregarding Kerala's pressing needs.

Speaking to THE WEEK, economist Mary George noted that the Union government has increased capital expenditure. She pointed out that since a project like Vizhinjam benefits not just Kerala but other states as well, it may receive some support, though there is no certainty at this point.

The CPI(M) state secretariat criticized the Centre’s stance on the project, stating that the government is well aware of Vizhinjam’s potential to drive national growth. “Yet, it has taken the most unfortunate stance regarding the viability gap fund for the project. The Union government has not shown such an attitude toward any other port in the country,” the CPI(M) statement read.

Speaking to THE WEEK, economist Jose Sebastian remarked that there seems to be an attitude that it does not matter even if a state like Kerala receives little to no support. The recent Economic Survey highlighted Kerala’s land leasing arrangement for horticulture, its localization of sustainable development goals (SDGs), and a waste management initiative by the Erattayar Grama Panchayat in Idukki district as success stories. The ruling CPI(M) secretariat pointed out that these projects exemplify why Kerala’s demand for more central projects and funds is justified. “However, when the Union announced national institutions, none were allocated to Kerala,” the statement noted.

Notably, an AIIMS remains a distant dream for the state. Kerala's long-standing demand for a railway coach manufacturing centre was also overlooked in the budget. Economists suggest that, for now, Kerala can only expect its fair share of funding for various projects, similar to the allocations received by other states, with no special package on the horizon.

However, Finance Minister K.N. Balagopal expressed concerns that Kerala may not even receive its share in some areas due to its overachievement in certain sectors. “The budget states that broadband internet will be ensured in all government secondary schools with the support of BharatNet. However, since Kerala already has broadband internet in place, the state will not receive funds under this allocation,” Balagopal explained.

Kerala Chief Minister Pinarayi Vijayan also stated that the Centre is punishing Kerala for the progress the state has made across various sectors. “While ₹25 lakh crore is being allocated to the states, Kerala is facing a situation where it is not even getting ₹40,000 crore,” he said. The CM added that the Centre is withholding funds from areas where Kerala has already made significant strides, while offering no support in sectors where the state expects assistance for further progress. "The Centre has ignored Kerala's demands, including the request for an increased borrowing limit," he said, while adding that the budget undermines the federal nature of governance.