As Kerala gears up for the upcoming Assembly election in April–May 2026, the incoming government will be confronted with a range of economic and social issues. The state’s public debt has surged to approximately Rs 4.8 lakh crore by mid-2025, creating significant financial strain with annual debt repayments nearing Rs 28,500 crore.
The mounting debt burden has limited the state’s ability to invest in new capital assets or expand development programs. Kerala has increasingly relied on entities like the Kerala Infrastructure Investment Fund Board (KIIFB) for financing infrastructure projects, leading to cash-flow challenges and delayed project payments. Despite these economic challenges, welfare schemes have been safeguarded, albeit under financial pressure.
With the debt-to-GSDP ratio expected to remain around 30% in 2025–26 and a persistent revenue deficit, Kerala may need to rely on higher state taxes and continued borrowing to manage its fiscal situation. The upcoming Assembly elections are eagerly anticipated, with the Communist Party of India (Marxist)-led Left Democratic Front (LDF), the Congress-led United Democratic Front (UDF), and the BJP-led National Democratic Alliance (NDA) gearing up for a keenly contested political battle.
