Kerala Economic Review 2025: GSDP grows 6.19% as deficits widen, inflation climbs

Thiruvananthapuram: Kerala's Real Gross State Domestic Product (GSDP) increased to ₹6,85,28,316 lakh in 2024-25, marking a growth rate of 6.19%. Although this maintains a positive trajectory, it represents a marginal slowdown from the 6.73% growth recorded in 2023-24. At current prices, GSDP grew by 9.97% in 2024-25, a slight increase from the 9.3% growth in the preceding year.

The Economic Review 2025 by the Kerala State Planning Board, released on Wednesday ahead of the State budget on January 29, reveals a complex financial landscape where steady economic growth is increasingly overshadowed by a widening fiscal gap and rising operational costs. While the State continues to report higher per capita income than the national average, the data points to a cooling economy and heightened fiscal stress compared to previous years.

On a per capita basis, the real GSDP rose by 5.67% to reach ₹1,90,149, which remains significantly higher than the all-India real per capita GDP of ₹1,33,501. This is, however, lower than 6.30% in 2023-24.

The fiscal deficit as a percentage of GSDP rose to 3.86% in 2024-25, up from 3.02% in 2023-24. Similarly, the revenue deficit widened to 2.49% of GSDP in 2024-25, a significant jump from the 1.6% recorded in 2023-24. While the government has set a target to reduce these figures to 3.16% and 1.9%, respectively for 2025-26, the current year-on-year increase highlights growing financial constraints.

The State’s total revenue receipts grew by a mere 0.3% in 2024-25, reaching ₹1,24,861.07 crore, up from ₹1,24,486 crore in the previous year. According to the report, a major factor contributing to this stagnation was a sharp 6.15% decline in transfers from the Central Government. While the State’s own tax revenue increased by 3.1%, it was insufficient to offset the drop in central funds and the rising demand for expenditure.

Total expenditure in Kerala surged by 9.0% in 2024-25, a dramatic increase compared to the near-flat growth of 0.5% in 2023-24. This was largely driven by revenue expenditure — which includes salaries, pensions, and daily administration — growing by 9.3% compared to 0.5% in the previous year. Capital expenditure also increased by 8.96% to ₹15,700 crore.

Inflationary pressures and unemployment
The primary sector showed signs of recovery with a growth of 2.36% in real terms, up from a sluggish 0.24% in 2023-24. However, the secondary sector, which includes manufacturing and construction, saw its growth rate fall to 7.87% from 9.74% in the previous year. Meanwhile, the cost of living remains a significant concern, as CPI-Combined inflation in Kerala reached 9.05% in September 2025, which is drastically higher than the national average of 1.54% reported for the same period.

Despite the State’s high human development indicators, the labour market continues to face challenges. The unemployment rate for males in Kerala stands at 4.4% compared to the national average of 3.2%, while female unemployment is notably higher at 11.6% against the national average of 3.2%. While the report suggests a long-term decline in these figures, they remain elevated relative to the rest of the country.