CM Siddaramaiah defends Karnataka’s fiscal management, blames Centre for fund shortfalls

Bengaluru, Mar 9 (PTI) Chief Minister Siddaramaiah on Monday defended Karnataka’s fiscal management and blamed the Centre for shortfalls in expected funds, saying the state had been forced to present a deficit Budget despite maintaining financial discipline.

Addressing a training session for legislators on the state budget, the CM explained the structure of the 2026–27 Budget, the state’s revenue sources and expenditure commitments, while also responding to opposition criticism over rising debt.

Siddaramaiah said the state’s latest Budget for 2026-27 size stood at Rs 4.48 lakh crore, compared to Rs 4.09 lakh crore in the previous financial year.

However, he said Karnataka could not fully implement last year’s proposed expenditure as funds expected from the Union government did not arrive.

“One reason was that funds that were supposed to come from the Central Government did not arrive. Because of that, we could not reach the total expenditure proposed in the Budget and were forced to present a deficit Budget,” he said.

According to him, the introduction of the Goods and Services Tax (GST) had slowed the growth of state tax revenues.

“Before the introduction of GST, the growth rate of our tax revenue was about 10 per cent. After GST was nationalised, the growth rate dropped to around four per cent,” he said, adding that the impact had been felt across states, including those ruled by the BJP.

Referring to fiscal discipline norms under the Fiscal Responsibility and Budget Management Act framework, the Chief Minister said a state’s finances were considered sound if it maintained a revenue surplus, kept fiscal deficit within 3% and limited debt to 25 per cent of Gross State Domestic Product.

He said Karnataka’s GSDP was about Rs 33.5 lakh crore, and the government was trying to ensure borrowing remained within permissible limits.

Responding to criticism from the opposition, Siddaramaiah said he had presented 17 budgets in his career and had consistently tried to maintain fiscal prudence.

“These days, the opposition frequently alleges that Siddaramaiah has taken excessive loans and that the state is running on debt… Even in this Budget, I have tried to maintain financial discipline,” he said.

He noted that Karnataka had maintained a revenue surplus until 2018, but now faced a deficit due to structural changes in revenue flows and the end of GST compensation from the Centre in 2022.

“For 2025–26, the revenue deficit was around Rs 19,000 crore, and for next year it is expected to be around Rs 22,000 crore. If the funds due from the Centre had been released, this deficit could have been eliminated and we could have maintained a surplus,” he said.

He also cited the implementation of the Jal Jeevan Mission as an example of financial strain on states. The scheme, estimated to cost around Rs 69,000 crore in Karnataka, is supposed to follow a 50:50 funding pattern between the Centre and the state.

“So far, the Centre has provided only about Rs 11,000 crore, while we have already spent more than Rs 27,000 crore. Essentially, we have also borne the Centre’s share,” he said.

Despite these constraints, Siddaramaiah said Karnataka’s economic performance remained strong. The state’s growth rate for 2025–26 was estimated at 8.1 per cent, compared to the national average of about 7.4 per cent.

He pointed out that Karnataka ranked second in the country in GST collections after Maharashtra.

Explaining the structure of state finances, Siddaramaiah said Karnataka’s own tax revenue mainly came from commercial taxes, stamp duty and registration, motor vehicle taxes and excise duties, while additional income came through non-tax revenues such as fees and royalties.

However, he said the state received only a small share of taxes collected by the Centre from Karnataka.

“Every year, Karnataka contributes over Rs 4.5 lakh crore in taxes to the Centre. However, the share returned to the state is only around Rs 73,000 crore. This means that for every Re one Karnataka contributes to the Centre, only about 15 paise comes back to the state, while 85 paise remains with the Centre,” he said.

Siddaramaiah said the issue was not unique to Karnataka and affected several states.

“This is not merely a political statement; several states are facing similar injustice. It is our duty to point it out,” he said.

He also explained that government spending was broadly divided into revenue expenditure, such as salaries, pensions and subsidies, and capital expenditure, including infrastructure like roads, schools and hospitals. PTI GMS GMS ROH