Pre-budget talks: Kerala seeks Rs 24,000 cr package to address state's liquidity crunch

Jaisalmer: The Kerala government on Friday demanded a special package from the Centre, of Rs 24,000 crore to manage the state's liquidity stress and Rs 2,000 crore for Wayanad rehabilitation.

In a pre-budget meeting in Jaisalmer, Kerala Finance Minister K N Balagopal also sought the continuation of the GST compensation scheme to states until systemic issues are fully corrected and the original promise of GST revenue is attained.

Union Finance Minister Nirmala Sitharaman, finance ministers from other states, and senior officials, among others, were present at the meeting, reported PTI.

"We reiterate our demand for a special package of Rs 24,000 crore to tide over the current liquidity stress by scheduling it over a period of two years from 2025-26," Balagopal said.

Citing that substantial resources are required for relief works in Wayanad, he urged the government to provide a special package of Rs 2,000 crore in the Union Budget 2025-26.

Additionally, the minister requested special assistance of Rs 5,000 crore for the Vizhinjam International Sea Port Ltd.

Asserting that fiscal consolidation targets should not compromise sustainable growth, Balagopal also said state governments are facing significant challenges in financing growth and development as their fiscal powers continue to erode.

"The immature implementation of GST, cessation of GST compensation and RD grants, conditions attached to the centrally sponsored schemes, newer restrictions in borrowing, reduction in the inter se share from the divisible pool, etc are major concerns to the fiscal space of the state governments, especially Kerala," the minister said.

He also expressed hope that the upcoming Union Budget will comprehensively address the concerns related to the country's current macroeconomic situation.

Noting that elevated inflation remains a critical hurdle for growth, Balagopal also said the economy faces issues such as slow credit and deposit growth, tightening liquidity conditions, and a weaker currency.