Every new government likes a white paper.
It serves two purposes. It gives the incoming administration a baseline from which to govern and a convenient explanation for why election promises may take longer to fulfil than advertised.
Kerala’s latest white paper on the state’s finances does both. It paints a grim picture of mounting debt, shrinking fiscal flexibility and a government machinery increasingly trapped by its own past commitments. The document says Kerala’s outstanding liabilities have reached ₹5.07 lakh crore, equivalent to 35.5 per cent of the state’s GSDP, while salaries, pensions and interest payments consume nearly 77 per cent of revenue receipts. (The Economic Times)
The numbers are alarming. But they are not surprising.
Anyone who has followed Kerala’s finances over the last decade knew the state was heading in this direction. The white paper merely puts official numbers to a story that has been visible for years.
The most important takeaway from the report is not the debt figure itself. States can and do carry debt. The real concern is what Kerala has been borrowing for.
Borrowing to build roads, ports, industrial corridors and productive infrastructure can create future growth that helps repay the debt. Borrowing to fund current expenditure is a very different proposition. It postpones the problem rather than solving it.
That distinction lies at the heart of Kerala’s fiscal challenge.
The white paper points out that capital expenditure remains among the lowest relative to the state’s economic size even as borrowings have increased sharply. (The Financial Express)
This is where the debate should move beyond politics.
The temptation will be for the Congress-led government to use the document as a political weapon against the previous Left administration. The Opposition, meanwhile, will challenge the methodology, question some of the numbers and point to the welfare achievements delivered during its tenure.
Both sides will have a point.
The previous government undoubtedly operated under significant fiscal constraints, including prolonged disputes with the Centre over borrowing limits. Kerala has long argued that fiscal rules designed for manufacturing-heavy states fail to recognise the unique social spending obligations of a state with an ageing population and high human development indicators.
Yet that argument can explain Kerala’s fiscal stress. It cannot fully explain away Kerala’s fiscal choices.
For years, successive governments have treated borrowing as a substitute for reform. Difficult decisions were postponed. Public sector losses accumulated. Revenue mobilisation failed to keep pace with expenditure commitments. Off-budget entities became an increasingly attractive way to finance spending without immediately confronting fiscal realities. (Onmanorama)
The result is visible today.
A state that once prided itself on social development now finds itself with very little room to fund the next phase of development. When three-fourths of revenue receipts are pre-committed before the budget year even begins, governments lose the ability to respond to new challenges or invest aggressively in growth. (NewKerala.com)
The larger question is whether Kerala’s political class is willing to acknowledge this reality.
White papers are useful documents. But Kerala has seen fiscal warnings before. Committees have written reports. Economists have highlighted structural weaknesses. Governments have promised course correction.
What has often been missing is political consensus.
Every subsidy has a constituency. Every pension increase has beneficiaries. Every reform creates opposition. In such an environment, borrowing becomes the easiest political option.
The arithmetic, however, eventually catches up.
Kerala’s white paper should not become merely another chapter in the state’s endless political blame game. If it ends there, it will have achieved very little.
Its real value lies in forcing an uncomfortable conversation about how Kerala intends to fund its future.
Because the state’s problem is no longer simply one of debt.
It is a growth problem, a revenue problem and ultimately a governance problem.
And unlike political narratives, arithmetic does not change with a change of government.