Kerala seeks Rs 24,000 cr special package to tide over liquidity crunch

Emphasising the need for more central funding, Kerala on Friday demanded a special package of Rs 24,000 crore to tide over the state's liquidity stress as well as Rs 2,000 crore for relief works at Wayanad, which was devastated by landslides earlier this year.

In a pre-Budget meeting here, Kerala Finance Minister K N Balagopal also sought continuation of the GST (goods and services tax) compensation scheme to states until systemic issues are fully corrected and the original promise of GST revenue is attained.

Union Finance Minister Nirmala Sitharaman, finance ministers from other states and senior officials, among others, were present in the meeting.

"We reiterate our demand for a special package of Rs 24,000 crore to tide over the current liquidity stress by scheduling it over a period of two years from 2025-26," Balagopal said. 

Citing that substantial resources are required for relief works in Wayanad, he urged the government to provide a special package of Rs 2,000 crore in the Union Budget 2025-26.

The devastating landslides that hit Kerala on July 30 resulted in 254 casualties while over 400 were injured. Also, around 118 people are still unaccounted for.

Further, the minister requested a special special assistance of Rs 5,000 crore for the Vizhinjam International Sea Port Ltd.

Asserting that fiscal consolidation targets should not compromise sustainable growth, Balagopal also said state governments are facing significant challenges in financing growth and development as their fiscal powers continue to erode.

"The immature implementation of GST, cessation of GST compensation and RD grants, conditions attached to the centrally sponsored schemes, newer restrictions in borrowing, reduction in the inter se share from the divisible pool etc are major concerns to the fiscal space of the state governments, especially Kerala," the minister said.

He also expressed hope that the upcoming Union Budget will comprehensively address the concerns related to the country's current macroeconomic situation.

Noting that elevated inflation remains a critical hurdle for growth, Balagopal also said the economy faces issues such as slow credit and deposit growth, tightening liquidity conditions, and a weaker currency.