The decade from 2016 to 2026 has been a period of rapid and unprecedented economic development in the State of Kerala. These changes have been achieved despite the financial constraints imposed on the State by the Union Government. Kerala has distinguished itself as the only State to sustain a formal planning process, enabling it to significantly increase capital expenditure from 2017 onwards, contrary to the declining trend observed in 18 major States after the dissolution of the Planning Commission.
Kerala’s growth rates are comparable to, and in some years higher than, the national average. Every sector of the economy has been put on a new growth path. The share of budgetary funds designated exclusively for people of the Scheduled Castes (SC) and Scheduled Tribes (ST) has consistently exceeded the share of SC/STs in the State. Since 2016, administrative approval for more than 1,200 infrastructure projects has been given for projects financed by the innovative new instrument of the Kerala Infrastructure Investment Fund Board (KIIFB). Local governments are now not only instruments of people’s participation but also catalysts of income-growth.
Kerala Bank was created by consolidating district cooperative banks into a single institution — a move that has strengthened financial stability, expanded rural credit, and opened the way for a people-oriented development bank. The heightened role of cooperative establishments can be illustrated with a single standout fact: Kerala is certainly the only State of the Union in which the largest civil construction company is a workers’ cooperative.
On education and health
There have been major investments in school infrastructure, teacher development, curriculum renewal, and IT-enabled learning. The State has achieved universal, free elementary education with a zero per cent dropout at the preparatory and middle-school level; the dropout rates among SC/ST students are among India’s lowest. Kerala is also India’s first fully digital State in school education. In higher and technical education, there have been reforms in governance, curriculum, and institutional structures, along with strong public investment. All these efforts have contributed to improved national rankings for schools, universities, and colleges.
Kerala is internationally recognised for its strong public health performance, with key indicators such as an infant mortality rate of just five per 1,000 live births — better than the United States. Programmes such as the Aardram Mission and Karunya Arogya Suraksha Padhathi have improved the health infrastructure and provided cashless health coverage (up to ₹5 lakh) to over 42 lakh families. The State has expanded services to cover mental health, non-communicable diseases, and e-health. Kerala’s handling of the Nipah outbreaks and the COVID-19 pandemic has demonstrated the strengths of the health system.
In November 2025, the Government of Kerala fulfilled a historic promise to the people when it put an end to extreme poverty. The policy on housing for the poor — and the actual modern, safe, comfortable houses built for the poor — has set, as in other fields, new national standards. By February 2026, over five lakh houses were built under the LIFE Mission.
Women in Kerala have attained high levels of educational attainment, and the highest life expectancy in the country. These outcomes reflect sustained investments in education, health care, nutrition, and social security, complemented by pioneering institutional innovations such as Kudumbashree, which has emerged as a globally recognised model for women’s collective empowerment, livelihoods, and local economic development. Child health is among the best in India, and the Gender Budget exceeds one-fifth of the Annual Plan outlay.
Social justice
Reflecting plan priorities, the new Elderly Budget, which takes up 19% of the State Budget for 2026-27, mainstreams senior citizens’ needs across planning, pensions, health care, and local governance. Over 75% of the elderly are covered by pension schemes. Allocations to schemes for persons with disabilities have more than doubled between 2016 and 2026.
The Public Distribution System (PDS) operates as a near-universal safety net, covering nearly 95 lakh ration card-holding households. The State actively intervenes in markets through its civil supplies network in order to maintain low food-price inflation well below the national average.
Human development gains have been used as a springboard for economic growth. Growth in the primary sectors, in industry, infrastructure, and in modern services (including information technology and tourism) has been unprecedented.
The long-held perception that Kerala is unfriendly to industrial growth has been laid to rest. Industry in Kerala has been placed on a new trajectory, driven by the growth of MSMEs and modern industries, the expansion of industrial infrastructure, higher levels of value addition, a turnaround in the performance of public sector undertakings, and modernisation of traditional sectors.
In 2016, commentators said that Kerala had missed the IT bus. In 2025, however, the Global Startup Ecosystem Report reported a 147% increase in ecosystem value in Kerala. Pioneering initiatives, such as recognising Internet access as a basic right and establishing K-FON, have played a significant role.
In an international context in which workers’ rights are being undermined, there has been a continuous effort in Kerala to strengthen labour law in favour of workers, including migrant workers. Kerala’s policies are a vital counter-narrative to the broader trend of deregulation.
Roads remain the backbone of mobility, and major corridor projects like the Hill Highway, alongside rapid four-laning of National Highways have significantly reduced travel time and strengthened east–west and last-mile connectivity. The Kochi Metro is now operating at scale, while the Kochi Water Metro, India’s first of its kind, has demonstrated the viability of clean inland water transport. The commissioning of the Vizhinjam International Deep-Water Seaport in 2024 marked a historic milestone. The road transport corporation has stabilised and improved performance. The State achieved full electrification in 2017 and has since maintained uninterrupted power supply, while reducing 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 decentralised disaster response and long-term recovery.
Public investment in culture rose sharply, with allocations for culture, museums, archaeology, and heritage recording a 30% increase in 2026–27. The International Film Festival of Kerala, Kochi-Muziris Biennale, International Theatre Festival of Kerala, and IDSFFK expanded in scale and global reach. Plan outlays for sports rose by nearly 160% between 2016-17 and 2026-27, backed by over ₹3,500 crore for infrastructure, including India’s first stadium for persons with disabilities.
Fiscal constraint
Kerala’s capacity to finance development is constrained by a structurally imbalanced federal fiscal architecture. This imbalance has been reinforced through multiple channels: the centralisation of taxation under the Goods and Services Tax (GST), the withdrawal of assured GST compensation, restrictive borrowing limits, and a growing reliance on conditional and discretionary transfers. The effective share of States in Union tax revenues has been eroded by the expanding use of cesses and surcharges outside the divisible pool, while unconditional Finance Commission transfers have been progressively supplanted by Centrally Sponsored Schemes characterised by rigid design, delays, and partial releases. Together, these developments have weakened the principles of cooperative federalism, reduced fiscal predictability, and narrowed the policy space available to Kerala to sustain public investment alongside their social and development commitments.
Over this decade, the Government of Kerala has sought to create and to present to India and the world a democratic, socially inclusive, participatory, high-growth, and sustainable alternative development policy. That effort must not be permitted to falter.
V.K. Ramachandran is Vice-Chairperson, Kerala State Planning Board
