In its 26-27 Budget, Kerala has introduced an elderly budget, a separate statement that tracks how much the government spends on people aged 60 and above. With this, it has forced a conversation about how states will finance an ageing society, write K J Joseph, Ashkar K & Kiran Kumar Kakarlapudi
l What is Kerala’s elderly budget?
THE ELDERLY BUDGET is not a parallel budget but a consolidated mapping of schemes that directly benefit senior citizens. It aggregates spending across pensions, healthcare, welfare services and community programmes into a single framework. The government classifies spending using a structured framework. Plan schemes that exclusively or predominantly benefit senior citizens are tagged as Part A, while schemes that provide partial but identifiable benefits are classified as Part B. Together, these plan schemes account for 3.8% of the state plan outlay.
In addition, the budget includes pensions and non-plan grants for elderly care institutions. This non-plan component makes up 21.72% of the state’s total non-plan expenditure, ensuring that recurring commitments are captured alongside development schemes. This classification system is what gives the elderly budget its analytical value. It allows policymakers to see not just how much is being spent, but how spending is distributed across exclusive and shared programmes.
National projections show a steady rise in the share of elderly citizens over the next two decades. Kerala has offered an early blueprint for planning for that future.
l Rationale for the focus on the aged
KERALA’S DEMOGRAPHIC PROFILE resembles that of middle-income economies. Senior citizens account for 18.7% of the population. By 2036, this could rise to nearly 23%. Kerala’s median age of close to 37 years is well above the national average. An ageing population reshapes public spending priorities. Demand rises for income support, chronic disease management and long-term care. Without advance planning, these can strain budgets and public health systems. The elderly budget is Kerala’s attempt to anticipate those costs rather than react to them. An ageing population also expands demand for a care economy that includes healthcare workers, caregivers, and social service providers. Structured investment in geriatric services can generate employment while addressing a growing social need.
l Where the money is going
FOR 2026-27, KERALA has identified elderly-related expenditure of `46,236.52 crore, about 19% of total state spending. That means nearly one in every five rupees the state spends is on ageing. Roughly two-thirds of the elderly budget is linked to pension payments, including welfare pensions for low-income seniors and retirement benefits for government employees. Kerala has earmarked `14,500 crore for welfare pensions in 2026–27. The budget includes `50 crore for a pneumococcal vaccination programme for vulnerable older people and expanded funding for community health initiatives such as Vayomithram, which delivers doorstep medical care. Then there is `30 crore for retirement homes and `10 crore for volunteer assistance programmes for seniors living alone.
l Can this reshape elderly care?
THIS MARKS A policy shift from welfare delivery to a rights-based, life-course approach to ageing that emphasises active and healthy living for seniors. Women make up a larger share of Kerala’s elderly population, and align-ment with the state’s Gender Budget framework enables targeted support for older women.Kerala’s approach goes beyond budgeting into institutional design. The state has established the Vayojana Commission, a statutory body for senior citizens. It also runs a network of care facilities, including government old-age homes, day-care centres and Pakalveedu facilities managed by local bodies.
l The fiscal need behind the move
THE ELDERLY BUDGET is as much about fiscal realism as it is about social policy. Pensions and healthcare for an ageing population represent long-term liabilities. Kerala already operates within tight fiscal limits. As the number of older people rises, such spending is set to grow faster than revenues unless supported by sustained economic expansion and stronger revenue mobilisation. A large share of the elderly budget reflects existing obligations that have been reclassified, rather than entirely new expenses. The challenge is to gradually shift emphasis toward preventive healthcare and efficient service delivery to contain long-term costs.
l Can other states replicate this?
KERALA’S EXPERIMENT COMES at a time when India is aging. Creating a demographic budget framework offers several advantages: it clarifies fiscal exposure, improves policy coordination, and encourages local governments to design targeted services. Kerala has already linked elderly population shares to local body funding criteria, nudging municipalities to become more age-responsive. Replication elsewhere will depend on fiscal capacity and institutional readiness. But Kerala’s model suggests that early accounting for demographic change can help avoid sharper fiscal adjustments later.
Joseph, Ashkar & Kakarlapudi are respectively, director, PhD scholar & assistant professor at Gulati Institute of Finance and Taxation, Thiruvananthapuram
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.