The question asks about the state associated with the famous dance form known as Kathakali. This requires knowledge of Indian cultural traditions, specifically regional dance forms.
Kathakali is a classical Indian dance form known for its unique combination of storytelling, elaborate costumes, detailed gestures, and well-defined body movements. It is a dance-drama that represents themes from Hindu epics such as the Ramayana and the Mahabharata.
Thus, the correct answer is Kerala.

| State | Literary Award |
|---|---|
| A. Gujarat | I. Sur Samman |
| B. Haryana | II. Ezhuthachan Puraskaram |
| C. Kerala | III. Thiruvalluvar Award |
| D. Tamil Nadu | IV. Sahitya Gaurav Puraskar |