Thiruvananthapuram: Even as Kerala grapples with a severe fiscal crunch, the state exchequer has received a significant boost with revenues rising by ₹5,629 crore during the first two months of the new financial year. The sharp increase, driven largely by a revival in market activity rather than any policy interventions, offers a measure of optimism for the newly elected UDF government.

The state’s revenue, which stood at ₹16,667 crore during April–May last year, has climbed to ₹22,296 crore in the corresponding period this year. The surge, however, cannot be attributed to the UDF government, which assumed office only on May 18.  Economists attribute the improvement primarily to a revival in market activity. The impressive revenue growth has come despite a slowdown in bureaucratic functioning during the election period, making the April–May figures an encouraging indicator for the state’s finances.

A significant contributor to the rise in GST receipts was the ₹3,502 crore received from the Centre in April towards settlement of the Integrated Goods and Services Tax (IGST). However, Kerala had also received ₹2,253 crore under the same head during the corresponding period of the previous financial year, resulting in an additional gain of ₹1,249 crore this year. This suggests that the overall revenue increase cannot be attributed solely to higher IGST settlement. IGST is the tax levied on inter-state transactions and is shared between the Centre and the states.

In just the first two months of the financial year, Kerala has already realised 14% of its projected annual tax revenue. GST collections alone have increased by ₹1,968 crore, while non-tax revenue too has risen by ₹1,259 crore. Notably, this growth has come despite the previous government’s Budget, presented in January ahead of the Assembly elections, introducing no major tax hikes.

Economists say the broad-based increase across revenue streams reflects renewed market momentum rather than policy changes. If the trend continues, they believe the new government could deliver a relatively stronger fiscal performance despite the severe financial constraints.

The Budget presented in January projected a total revenue of ₹2.39 lakh crore for the financial year. However, Kerala is expected to lose nearly ₹20,000 crore owing to a reduced share of Central taxes and the discontinuation of the Revenue Deficit Grant. The UDF government now faces the challenge of either identifying alternative revenue sources or reducing the size of the Budget to bridge the shortfall.

LDF to release white paper ahead of Budget
Meanwhile, the LDF is expected to release its own white paper on the state’s financial position on Wednesday. The document contends that the white paper presented by the UDF government contains several inconsistencies and factual errors while overlooking many of the achievements of the previous administration.