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Kerala's Fiscal Alarm: FM Balagopal Unveils Staggering Rs 12,000 Crore GST Revenue Black Hole

  • Nishadil
  • September 23, 2025
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Kerala's Fiscal Alarm: FM Balagopal Unveils Staggering Rs 12,000 Crore GST Revenue Black Hole

Kerala's financial landscape is facing an unprecedented challenge, with Finance Minister K.N. Balagopal delivering a stark warning about an impending financial crisis. The state, he asserts, is staring down the barrel of a colossal Rs 12,000 crore annual revenue loss. This staggering figure is attributed directly to the revamped Goods and Services Tax (GST) structure and the central government's controversial decision to discontinue GST compensation for states.

Balagopal's address painted a grim picture of Kerala's fiscal future, highlighting how the Centre's recent policy shifts are undermining the financial autonomy and stability of states.

He vehemently criticized the central government for unilaterally making decisions regarding GST, arguing that these changes significantly reduce the states' share of revenue and impose severe restrictions on their borrowing capabilities. This, he emphasized, is a direct assault on the principles of federalism that underpin India's democratic structure.

The Finance Minister pointed out that the discontinuation of GST compensation, which was initially promised for five years following the GST rollout in 2017, is a major blow.

This compensation mechanism was crucial for states like Kerala, which are primarily consumer states and rely heavily on indirect taxes. Without it, the gap between tax collections and state expenditure is set to widen dramatically, potentially leading to a severe fiscal crunch.

Adding to Kerala's woes are the stringent cuts in borrowing limits imposed by the Centre.

Balagopal revealed that the Centre's decision to classify funds borrowed by the Kerala Infrastructure Investment Fund Board (KIIFB) as public debt further constricts the state's capacity to raise resources for vital development projects. This move effectively diminishes Kerala's ability to invest in critical infrastructure and social welfare initiatives, impacting its long-term growth trajectory.

Balagopal didn't mince words, calling for a united front among all states to protest against these central policies.

He acknowledged that while some states might not feel the immediate pinch, the long-term ramifications of these changes would affect every state, particularly those with high consumption rates. He also highlighted that the Centre's reduction of the state's share of tax revenue from 60% to 50% further exacerbates the financial strain, indicating a consistent pattern of central policies that disempower states financially.

The minister's urgent appeal underscores a broader concern about the erosion of states' financial powers and the increasing centralization of fiscal authority.

For Kerala, a state that has historically prided itself on its social development indices, this looming financial crisis could have profound and far-reaching consequences for its citizens.

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