The decade from 2016 to 2026 has been a period of rapid and unprecedented economic growth in the state of Kerala. These changes have been achieved despite financial constraints imposed on the state by the central government. In contrast to the declining trend seen in 18 major states after the dissolution of the Planning Commission, Kerala has distinguished itself as the only state to retain a formal planning process, which has been able to significantly increase capital expenditure since 2017.
Kerala’s growth rate is equal to the national average and in some years even exceeds it. Every sector of the economy has been taken to a new path of development. The share of budgetary funds specifically designated for Scheduled Caste (SC) and Scheduled Tribe (ST) people has consistently been higher than the share of SC/ST in the state. Since 2016, administrative approval has been given to more than 1,200 infrastructure projects for projects financed by the innovative new instrument of the Kerala Infrastructure Investment Fund Board (KIIFB). Local governments are now not only a means of people’s participation but also a catalyst of income growth.
Kerala Bank was established by consolidating district co-operative banks into one institution – a move that strengthened financial stability, expanded rural credit, and opened the way for a people-oriented development bank. The increased role of co-operative establishments can be illustrated by an extraordinary fact: Kerala is certainly the only State in the Union in which the largest civil construction company is a workers’ co-operative.
on education and health
There have been major investments in school infrastructure, teacher development, curriculum renewal and IT-enabled education. The state has achieved universal, free elementary education with zero percent dropouts at the elementary and middle-school level; The school dropout rate among SC/ST students is the lowest in India. Kerala is also India’s first fully digital state in the field of school education. In higher and technical education, there have been strong public investments as well as reforms in governance, curriculum and institutional structures. All these efforts have contributed to improving the national rankings of schools, universities and colleges.
Kerala is recognized internationally for its strong public health performance, with key indicators such as the infant mortality rate being only five per 1,000 live births – better than the United States. Programs such as Aardam Mission and Karuna Arogya Suraksha Paddhati have improved health infrastructure and provided cashless health coverage (up to Rs 5 lakh) to more than 42 lakh families. The state has expanded services to cover mental health, non-communicable diseases and e-health. Kerala’s handling of the Nipah outbreak and the COVID-19 pandemic has demonstrated the strength of the health system.
In November 2025, the Government of Kerala fulfilled a historic promise to the people by ending extreme poverty. Housing policy for the poor – and actual modern, safe, comfortable houses built for the poor – has, as in other areas, set new national standards. More than five lakh houses were built under the LIFE Mission by February 2026.
Women in Kerala have achieved high levels of educational attainment and the highest life expectancy in the country. These results reflect sustained investments in education, health care, nutrition and social protection, complemented by pioneering institutional innovations like Kudumbashree, which has emerged as a globally recognized model for women’s collective empowerment, livelihoods and local economic development. Child health is one of the best in India, and the gender budget accounts for more than a fifth of the annual plan outlay.
social justice
Reflecting the priorities of the Plan, the new elderly budget, which takes up 19% of the state budget for 2026-27, mainstreams the needs of senior citizens into planning, pensions, health care and local governance. More than 75% of the elderly are covered under pension schemes. The allocation for schemes for persons with disabilities has more than doubled between 2016 and 2026.
The Public Distribution System (PDS) serves as an almost universal safety net, covering approximately 95 lakh ration card holding households. The state actively intervenes in markets through its civilian supply network to keep food-price inflation well below the national average.
Human development benefits have been used as a springboard for economic growth. Growth in primary sectors, industry, infrastructure and modern services (including information technology and tourism) has been unprecedented.
The long held belief that Kerala is not conducive for industrial development has now ended. Industry in Kerala has been placed on a new trajectory driven by the growth of MSMEs and modern industries, expansion of industrial infrastructure, high levels of value addition, turnaround in performance of public sector undertakings and modernization of traditional sectors.
In 2016, commentators said that Kerala had missed the IT bus. However, in 2025, the Global Startup Ecosystem Report recorded a 147% increase in ecosystem value in Kerala. Pioneering initiatives such as recognizing Internet access as a fundamental right and setting up K-FON have played an important role.
In an international context where workers’ rights are being undermined, there has been a sustained effort in Kerala to strengthen labor laws in favor of workers, including migrant workers. Kerala’s policies are an important counter-narrative to the broader trend of deregulation.
Roads remain the backbone of mobility, and fast four-laning of national highways as well as major corridor projects like Hill Highways have significantly reduced travel times and strengthened east-west and last-mile connectivity. Kochi Metro is now operational on a large scale, while Kochi Water Metro, the first of its kind in India, has demonstrated the feasibility of clean inland water transportation. The commissioning of Vizhinjam International Deep-Water Port in 2024 marks a historic milestone. The Road Transport Corporation has stabilized and improved its performance. The state achieved full electrification in 2017 and has since maintained uninterrupted power supply while minimizing technical and commercial losses. Total installed capacity expanded by 50%, with solar power emerging as the most dynamic segment.
Kerala has emerged as a national and international reference point in disaster management, demonstrating effectiveness with respect to immediate and decentralized disaster response and long-term recovery.
Public investment in culture increased rapidly, with allocations for culture, museums, archeology and heritage increasing by 30% in 2026–27. The International Film Festival of Kerala, Kochi-Muziris Biennale, International Theater Festival of Kerala and IDSFFK expanded in scale and global reach. The plan outlay for the Games increased by nearly 160% between 2016–17 and 2026–27, with over ₹3,500 crore contributed for infrastructure, including India’s first stadium for persons with disabilities.
fiscal drag
Kerala’s ability to finance development is constrained by a structurally imbalanced federal fiscal architecture. This imbalance has been reinforced through multiple channels: centralization of taxation under the Goods and Services Tax (GST), assured GST compensation refunds, restrictive borrowing limits, and increasing reliance on conditional and discretionary transfers. The increasing use of cesses and surcharges outside the divisible pool has reduced the states’ effective share in Union tax revenue, while unconditional Finance Commission transfers have been increasingly replaced by centrally sponsored schemes characterized by rigid design, delays and partial releases. Together, these developments have weakened the principles of cooperative federalism, reduced fiscal predictability, and limited the policy space available for Kerala to maintain its social and development commitments as well as public investment.
In this decade, the Government of Kerala has sought to formulate and present to India and the world a democratic, socially inclusive, participatory, high growth and sustainable alternative development policy. That effort should not be allowed to fail.
VK Ramachandran is the Deputy Chairman of Kerala State Planning Board
