Kerala’s Budget for 2026-27 has significantly boosted the industries sector with an enhanced allocation of ₹1,417.26 crore, an increase of ₹122.54 crore from the previous year. This funding aims to establish the state as a hub for critical minerals, defence technology, and high-value industrial growth, while also strengthening micro, small, and nano enterprises. Key initiatives include the creation of a Rare Earth Corridor, a Defence Technology Innovation Hub, and substantial support for MSMEs. The budget proposes the establishment of a Rare Earth Corridor, which will connect Vizhinjam Port to Chavara and extend to Kochi. A dedicated center for this initiative will be set up near Kerala Minerals and Metals Ltd (KMML) in Chavara. This corridor is intended to leverage the state’s potential in critical minerals.To support this endeavor, ₹100 crore has been earmarked for a Rare Earth Critical Minerals Mission. This mission will focus on identifying, processing, and promoting critical mineral resources. The initiative is expected to position Kerala as a leading hub for rare earth and strategic minerals, aligning with national objectives for supply-chain security.
In the defence sector, the budget outlines the creation of a Defence Technology Innovation Hub. This hub will connect institutions involved in defence research and advanced manufacturing. An allocation of ₹50 crore is designated for developing a Defence Research and Development Corridor to foster innovation and indigenous capability building.
Finance Minister K N Balagopal highlighted the improved investment climate in Kerala. He attributed this to policy reforms that have led to the state topping Ease of Doing Business rankings.
Over the past five years, Kerala has seen significant industrial growth.
3.92 lakh new enterprises were established.
₹22,000 crore in investments flowed into the state.
7.5 lakh employment opportunities were generated.
The budget places a strong emphasis on supporting Micro, Small, and Medium Enterprises (MSMEs) and grassroots entrepreneurship.
₹35 crore is allocated for expanding Mission 1000, which aims to upgrade micro enterprises to small and small enterprises to medium.
A new Mission 1,00,000 is allocated ₹4 crore, targeting the upgradation of 1 lakh nano and micro enterprises. The goal is for each to achieve a minimum ₹1 crore annual turnover.
The Entrepreneur Support Scheme (ESS) receives ₹110 crore. Under this scheme, ₹203.56 crore has already been disbursed to 3,431 entrepreneurs over four years.
A Special Package Scheme for MSMEs is allocated ₹63 crore.
Promoting nano enterprises through margin money grants will receive ₹17.06 crore.
To enhance rural value addition, the budget proposes the development of rural apparel parks and rural electronic assembling parks. These will be established in collaboration with local bodies. An initial allocation of ₹10 crore has been made to set up two such parks in the first year.
In addition to the 38 private industrial parks already allocated, new categories will be introduced. These include Pravasi industrial parks, Women industrial parks, and Traditional industrial parks.
The government will establish the Kerala University for Skill Development and Entrepreneurship. This will operate under a Public-Private Partnership (PPP) model. The university aims to produce graduates ready for industry needs.
Further, ₹39.45 crore has been allocated for infrastructure development in the small-scale industries sector. For Public Sector Undertaking (PSU) reforms, ₹294.60 crore is earmarked under the Comprehensive Economic Restructuring Plan. The number of profit-making PSUs has increased significantly.
The number of profit-making PSUs rose from 12 in 2021–22 to 22 in 2024–25.
Kerala’s Budget 2026–27 signals a strategic shift towards high-value, future-facing industries. This includes a focus on rare earths and defence technologies, alongside scaling up MSMEs and enhancing skill development. By combining large-scale industrial vision with grassroots enterprise support, the state is positioning itself as a competitive, innovation-driven industrial economy for the coming decade.
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