Chief Minister Siddaramaiah will present Karnataka’s budget for 2026-27 in the Legislative Assembly today, as the state grapples with revenue pressures, increasing welfare liabilities and controversies over debt estimates.
The Prime Minister will present his record 17th Budget at 10.15am. Officials indicate that total spending may reach approx $4.20 million crores.
As in the previous budget, the 2026-2027 plan is expected to project a revenue shortfall. The state is unlikely to meet the revenue targets set for 2025-26 due to several factors, including the impact of changes in the GST rate.
Karnataka is likely to end the current fiscal year with a revenue shortfall of about $18,000 crore, largely due to the rationalization of the GST rate introduced in September last year. “States should have been compensated for this,” he said.
The administration has also taken steps to increase revenues from mining. Earlier this week, it created a new post of Secretary (Mines), allocating additional charge to Commercial Taxes Commissioner Vipul Bansal. Officials expect the mining sector to bring in more $3000 Crores $4000 crores in the next financial year.
At the same time, the government faces increasing spending commitments. For the period 2025–26, $Rs 51,034 crore has been allocated for the Congress government’s flagship guarantee schemes, although there are suggestions in some quarters to trim the allocation.
The administration must also factor in its plan to fill 56,432 vacant positions, a move expected to result in a significant increase in payroll expenses. The country’s salary bill has already risen from $61,498 crore in 2023–24 to an estimated $85,860 crore in the current financial year.
Overall, the government is expected to allocate approx $3.45 lakh crore towards routine expenditure in the next financial year. Salaries and pensions alone are expected to require spending of approx $1.36 million crores.
In the current fiscal year ending March, the size of Karnataka’s state budget was $4.09 million crores. About 82% of this amount went to revenue expenses and debt repayment, leaving $Rs 71,336 crore for capital expenditure.
Revenue expenditures include recurring obligations such as salaries, pensions, benefits, and interest payments. The mid-year review of state finances released in December noted that increased spending on social care initiatives had contributed to increased committed spending. “The increase in committed spending, including state spending on guarantees and various social welfare schemes, has led to increased revenue spending,” the mid-year review said.
Revenue deficit trends also shaped the state’s fiscal position. When the Congress government presented its first budget for the current period 2023-2024, with allocations for guarantee schemes, the estimated revenue shortfall amounted to $12,523 crore, which later came down to approx $8,000 crore in revised estimates.
For the period 2024-2025, the revenue deficit was expected to be $27,354 crore but eventually fell to a little less $20,000 Crores. In the period 2025-2026, the deficit is estimated at approximately $19,262 crore and could expand due to GST-related revenue losses and slow collections in the stamp and registration department.
Meanwhile, the state government has disputed the Reserve Bank of India’s estimate of what Karnataka’s liabilities will be $8.14 lakh crore by the end of the current financial year. “…number $8,14 lakh crores reported externally overstates the state’s liabilities and the correct figure for the total state liabilities is likely to be 7,64,655 crores at the end of 2025-26, the Finance Ministry said in a statement.
According to Reserve Bank of India estimates, Karnataka’s liabilities will reach 26.5% of the state’s GDP, which exceeds the permissible limit of 25%. However, the state government confirmed that its commitments amounted to 24.91% of GDP.
“The difference between the figure mentioned in the RBI report and the state government’s liability estimate arises due to the inclusion of certain items which do not constitute the actual debt liabilities of the state,” the Finance Ministry said.
Officials said the Reserve Bank of India report included $Rs 20,412 crore has been collected as GST offset loans under the state liabilities. “However, this borrowing is supported by the Union government and is serviced by the tax collected by the Centre,” she added.
The Ministry of Finance also said $The amount of Rs 23,810 crore was “double counted” as the money collected through certain state taxes was recorded as general account balances and as investments in earmarked funds.
“The state gets its tax receipts by levying some taxes. These taxes are deposited in a fund and later used for capital investments in major infrastructure projects,” she said.
“These funds are double counted as a regular balance of the General Account Fund and also in a separate category called ‘Investment in Appropriated Funds’, resulting in double counting,” she added.
last $The Rs 16,300 crore invested by the state in the Reserve Bank of India’s Consolidated Sinking Fund and Guarantee Recovery Fund has also been treated as a liability. “These are investments made by the state as per the recommendation of the Reserve Bank of India as a guarantee for future repayment and hence cannot be considered as a liability,” the ministry said.
“Due to the above three factors, there is an amount of approx $“An amount of Rs 60,500 crore was incorrectly included as part of state liabilities in the external report,” the ministry said, adding that it had asked the Accountant General to reclassify the entries and that “a solution is expected soon.”
