Kerala could face a fiscal shortfall of nearly Rs 20,500 crore in the current financial year after the revenue deficit grants projected in the state's 2026-27 Interim Budget failed to materialise, Chief Minister V. D. Satheesan has said.
In a post on X on Thursday, Satheesan criticised the 2026-27 Interim Budget presented by the previous Left Democratic Front (LDF) government in the state, alleging that it was based on flawed assumptions regarding central transfers.
According to the Chief Minister, the budget had projected Rs 14,138 crore as revenue deficit grants from the Centre. However, Satheesan pointed out that the 16th Finance Commission has not awarded any such grant to Kerala, leaving a significant gap between the state's budget estimates and the actual flow of funds.
“The 2026–27 Interim Budget presented by the #LDF Government rests on flawed assumptions. It projected ₹14,138 crore as Revenue Deficit Grants, yet the 16th Finance Commission has made no such award. As a result, Keralam faces an estimated shortfall of nearly ₹20,500 crore in central transfers this year,” the Kerala CM said in the X post.
Satheesan said that the absence of the projected grant would result in an estimated shortfall of nearly Rs 20,500 crore in central transfers during the financial year. He warned that the development poses a serious challenge to Kerala's finances and could affect the state's ability to meet its expenditure commitments.
Satheesan also questioned the credibility of the budget assumptions made by the previous LDF government. He said the failure of the projected revenue deficit grants to materialise raises concerns over the sustainability of the state's fiscal planning and the accuracy of the estimates on which the interim budget was prepared.
Satheesan on Thursday said the state was facing a severe fiscal challenge due to absolute mismanagement of public finances and warned that the new government would have to undertake major corrective measures to restore stability. After tabling a White Paper on the financial status in the Assembly, Satheesan told the media that the document was not an investigation report but an attempt to place before the people the actual condition of Kerala’s finances.
"The fiscal health of the state should be known to all our people. They should know what our income is, what our expenditure is and what the way forward is," he said, adding that the presentation had become necessary ahead of the new government’s first budget.
Satheesan said the figures presented in the White Paper reflected the reality and that political slogans or "Left jargon" could not hide the financial situation anymore. According to the document, the new government has inherited total pending obligations amounting to Rs 48,733 crore, as on March 31, 2026.
The liabilities include Rs 21,670 crore towards DA arrears of government employees and teachers, Rs 14,387 crore in arrears of pensioners, Rs 3,431 crore under the Bill Discounting System involving banks and contractors, and other pending commitments, including health scheme claims, Supplyco dues, KMSCL payments, scholarships, and local body instalments.