Kerala Requests Rs 24,000 Crore Special Package to Alleviate Liquidity Crunch and Support Wayanad Relief Efforts

Kerala has requested a special financial package of Rs 24,000 crore from the central government to address its liquidity challenges. Additionally, the state seeks Rs 2,000 crore for relief efforts in Wayanad, which suffered severe landslides earlier this year. These demands were made during a pre-Budget meeting attended by Union Finance Minister Nirmala Sitharaman and other state finance ministers.

Representative image

The Kerala Finance Minister, K N Balagopal, emphasised the necessity of continuing the GST compensation scheme until systemic issues are resolved and promised GST revenue targets are met. He reiterated the request for the Rs 24,000 crore package to be distributed over two years starting from 2025-26. This funding is crucial for overcoming the state's current financial stress.

Relief Efforts and Financial Challenges

Balagopal highlighted that substantial resources are needed for Wayanad's relief work. The landslides on July 30 resulted in 254 deaths and over 400 injuries, with 118 people still missing. He urged the government to allocate Rs 2,000 crore in the Union Budget 2025-26 for these efforts.

The minister also called for Rs 5,000 crore in special assistance for Vizhinjam International Sea Port Ltd. He stressed that fiscal consolidation should not hinder sustainable growth. State governments face significant challenges in financing development due to eroding fiscal powers.

Concerns Over Fiscal Space

Balagopal pointed out several concerns affecting state governments' fiscal space. These include the premature implementation of GST, cessation of GST compensation and RD grants, conditions on centrally sponsored schemes, borrowing restrictions, and reduced inter se share from the divisible pool. These issues particularly impact Kerala's financial stability.

He expressed hope that the upcoming Union Budget will address these macroeconomic concerns comprehensively. Elevated inflation remains a significant barrier to growth, alongside slow credit and deposit growth, tightening liquidity conditions, and a weaker currency.

The minister's requests reflect Kerala's pressing need for central support to manage its financial difficulties and ensure sustainable development. The state's demands highlight broader challenges faced by state governments in maintaining fiscal health amid evolving economic conditions.