Facing mounting fiscal pressure from U.S. trade tariffs and the recent GST slab rejig, the Kerala government has urged the 16th Finance Commission to reassess its financial outlook and resource needs for the next five years.
In its submission, the State sought supplementary grants under Article 275 and an extra borrowing limit of 0.5% of GSDP, arguing that shrinking revenues and rising welfare obligations demand urgent fiscal flexibility.
Kerala highlighted that structural shifts in trade and taxation have eroded inflows while simultaneously raising the cost of welfare and development spending. It called for revenue deficit grants and vertical devolution shares to be recalibrated in line with these realities.
Officials warned that without corrective measures, the State’s fiscal space could narrow sharply, jeopardizing funding for healthcare, education, and infrastructure projects.
