Kerala's Economic Growth Faces Debt Challenge

Kerala's economy grew robustly in the 2024-25 fiscal year, with a 6.19% rise in GSDP. However, the state faces rising public debt, with a debt-to-GSDP ratio of 24.83%. The services sector leads growth, but inflation and fiscal deficits pose additional challenges.

Kerala's economy exhibited significant growth during the 2024-25 fiscal year, as highlighted in the Economic Review presented to the state Assembly. Finance Minister K N Balagopal reported a 6.19% increase in the Gross State Domestic Product (GSDP), marking an upturn from the previous year's 6.0% growth. Key sectors across the state underwent marked improvements, contributing to an overall economic expansion of nearly 10% at current prices.

Despite the positive economic indicators, Kerala's burgeoning public debt poses a substantial challenge. The state's outstanding public debt surged to Rs 3,10,015.86 crore, a marked increase from Rs 2,64,000 crore the prior year. This escalation drew the debt-to-GSDP ratio to 24.83%, largely driven by internal market borrowings and institutional loans. A Comptroller and Auditor General of India report noted that Kerala's public debt ratio remains slightly below the 25% threshold that 14 other states have surpassed.

Inflation remains a topic of concern, with the Consumer Price Index indicating a rate of about 9% as of September 2025, surpassing the national average. Concurrently, the state's fiscal deficit has widened, and though revenue receipts stayed largely stable, transfers from the central government have sharply decreased, further complicating the fiscal landscape.