Views of States like Karnataka should be factored in while formulating trade policy: Siddaramaiah

Bengaluru, Mar 6 (PTI) Chief Minister Siddaramaiah on Friday said that it is important that the perspectives of globally integrated States such as Karnataka are meaningfully factored in while the Centre formulates trade policy, as recent developments relating to tariff measures and evolving trade arrangements have important implications for the State.

Presenting the Budget for 2026-27, he said that despite structural challenges arising from tax policy changes by the Union Government, the State's own revenue collections have exhibited resilience, supported by effective resource mobilisation measures undertaken by his government.

"Karnataka today is one of the most globally integrated State economies in India. Our leadership in Information Technology and IT-enabled services, biotechnology, aerospace and defence manufacturing, electronics and semiconductor design, start-up innovation, and advanced manufacturing has positioned us as a key contributor to India's exports and foreign direct investment inflows," Siddaramaiah said.

He said that, consequently, recent developments relating to tariff measures and evolving trade arrangements involving the United States and other major economies have important implications for our State.

The CM said that while international trade negotiations are inherently complex and must balance strategic national interests, it is equally important that the perspectives of globally integrated States such as Karnataka are meaningfully factored in the formulation of trade policy.

In a true spirit of cooperative federalism, sustained consultation between the Union and the States strengthens India's negotiating position and ensures that regional economic strengths are protected. Karnataka will continue to work constructively with the Union Government while simultaneously reinforcing domestic resilience.

Siddaramaiah said the state economy recorded a strong real GSDP growth of 8.1 per cent at constant prices in 2025'“26, surpassing the national growth rate of 7.4 per cent for the same period.

"This performance was supported by broad-based sectoral growth and reflects the State's diversified and stable growth pattern," he said, adding that the continued emphasis on capital investment by the Government, together with a revival in private sector investment, has provided significant impetus to overall economic growth.

The CM said, Karnataka continues to demonstrate strong fiscal performance and robust revenue mobilisation capacity.

Despite structural challenges arising from tax policy changes by the Union Government, the State's own revenue collections have exhibited resilience, supported by effective resource mobilisation measures undertaken by the State Government, he said. The State's own revenues are estimated to grow by 8.3 per cent in the Revised Estimates for 2025-26 over 2024-25.

Goods and Services Tax (GST) remains the largest component of the State's tax revenue, accounting for about 43 per cent of the State's own tax revenue, he further said, "Karnataka ranks second in the country in GST revenue collection, underscoring its strong economic fundamentals." Pointing out that the GST rate rationalisation done in September 2025 has further reduced GST collections, the CM said before rationalisation, the State's average monthly GST revenue collections in 2025-26 were registering a growth (net of refunds) of about 10 per cent.

However, following the implementation of rate rationalisation, the average monthly growth has moderated sharply to around 4 per cent in 2025-26, he said, "The rate restructuring has resulted in a reduction in overall GST collections by approximately Rs.10,000 crore for the current financial year and Rs.15,000 crore for next year." The moderation in GST revenues has intensified the fiscal pressures on all States, as their revenue base is more directly affected by rate rationalisation and structural changes, compared to the Union Government, Siddaramaiah said.

"While States face revenue compression, the Union Government continues to mobilise significant revenues from sin and luxury goods through different forms of taxation, the proceeds of which accrue entirely to the Government of India," he said, adding that in view of the large revenue losses, the state will continue to press for adequate compensation from the Union government for revenue losses arising from GST rationalisation.

Siddaramaiah also said that the 16th Finance Commission has submitted its report for the award period 2026-31 and has recommended a tax devolution share of 4.131 per cent for Karnataka, which is an increase of 13 per cent over the share recommended by 15th Finance Commission.

While the state was expecting the restoration of the devolution share of 4.71 per cent provided by the 14th FC, the 16th FC's recommendation is a partial redressal of the injustice caused to the State.

The state welcomes the inclusion of GSDP contribution, as it is a directional shift recognising the state's performance and contribution to national economic growth by the 16th Finance Commission, he said. "We hope that this progressive rebalancing of equity and efficiency will be carried forward by the next finance commission as well, and high-growth states like Karnataka will be encouraged to perform better." PTI KSU ADB