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Informist, Friday, Mar. 7, 2025

By Priyasmita Dutta

NEW DELHI – Karnataka Chief Minister Siddaramaiah, who has the portfolio of finance as well, presented the Budget for 2025-26 (Apr-Mar) in the State Assembly on Friday and announced a development-focussed Budget by balancing capital expenditure push and welfare spending, while adhering to its fiscal limits. "By balancing economic development with people's welfare, we are shaping Karnataka's development model through the concept of Universal Basic Income," Siddaramaiah said at the very start of his 16th Budget speech. The state's gross state domestic product is seen growing 7.3% in FY26.

The Budget pegged the state's fiscal deficit at 2.95% of GSDP for FY26, 5 basis points higher than the revised estimate of 2.90% of GSDP this year. As part of its rolling targets, Karnataka's fiscal deficit is projected at 2.80% in FY27, 2.68% in FY28, and 2.57% in FY29. "Karnataka's economic outlook for the fiscal year 2025-26 reflects a trajectory of robust growth and increased investment," according to the state's Budget documents.

The state's market borrowing in FY26 is projected to be INR 1.05 trillion, 16.7% higher than the revised estimate of INR 900 billion for FY25. As per the state's Budget documents, Karnataka's public debt is projected at 24.91% of GSDP in FY26 and for FY25, it is projected at 23.94%. The rolling targets also projected its debt to be 24.46% of GSDP in FY27, 24.02% in FY28, and 23.60% in FY29. "The borrowing strategy aligns with responsible debt management practices, ensuring that resources are effectively utilized to enhance public services and promote overall economic resilience, all while adhering to prudent financial limits concerning fiscal deficit and debt to GSDP ratio," according to the Medium Term Fiscal Plan.

The total expenditure for FY26 is projected at INR 4.10 trillion, up 11.9% from the current year. Out of this, revenue expenditure for FY26 is pegged at INR 3.12 trillion, up 9.8% from this year. This includes the expenditure on salaries, pensions, interest, grants, and subsidies. The capital expenditure for FY26 is projected at INR 713.36 billion, sharply higher by 25.2%. Over the last six years, Karnataka's growth in budgetary allocation for capital expenditure has slightly outpaced the growth in revenue expenditure, albeit there is a huge difference in quantum.

Within its expenses, Karnataka government focussed its spending on six key developmental dimensions – welfare programmes, agriculture and rural development, development-oriented allocations, urban development, investment and job creation and governance reforms. Beyond these initiatives, Siddaramaiah said the government will prioritise "new strategies" to eliminate regional disparities, strengthen education and health sectors, ensure an efficient transport system, and maintenance of law and order. "This budget strengthens the desire to systematically assemble the bricks of sustainable development in the process of State building," he said.

Defending the state's guarantees which are welfare programmes, he said that they were "not merely freebies" and he "can confidently" say that these are "strategic investments made on economic and social principles." The five guarantee schemes are 'Gruhalakshmi' that pays INR 2,000 to women, 'Anna Bhagya', which is a direct benefit transfer of money, 'Gruha Jyothi' that promises free electricity, 'Shakti' that offers free bus service for women, and 'Yuvanidhi' that gives financial assistance to unemployed graduates. He allocated INR 510.34 billion for these guarantees, lower than the INR 517.70 billion allocated for FY25.

One of Siddaramaiah's key Budget announcement was a new scheme called the 'Chief Minister's Infrastructure Development Program' with an allocation of INR 80 billion for development across the state, focussing on irrigation, roads and urban infrastructure. He also hiked the yearly grant given for the basic infrastructure development of Bengaluru to INR 70 billion from INR 30 billion. The state government will guarantee INR 190 billion for the North-South and the East-West corridors tunnel project, he added. The chief minister also announced a host of other infrastructure projects to improve connectivity and traffic situation in the state. 

On the revenue side, Siddaramaiah projected the revenue receipts for FY26 at INR 2.92 trillion, 13.5 higher than the revised estimate for FY25. The state's own tax revenue is seen growing 15.4% to INR 2.08 trillion, while the state's non-tax revenue is seen growing 13.8% to INR 165 billion. He also touched upon the Union government's failure to fully compensate for GST revenue loss, non-devolution of cesses and surcharges, and lower tax devolution from the Fifteenth Finance Commission which compounded to fiscal challenges. "As a result, Karnataka has been facing revenue challenges in its pursuit of long-term growth with social justice."

In its own tax revenues, goods and services tax, excise, and stamp and registration duties make up the majority chunk, which are seen growing 14.3%, 9.6% and 16.7%, respectively. In absolute terms, the state's GST collection is seen at INR 1.20 trillion in FY26, while collection from excise duty is seen at INR 400 billion, and INR 280 billion as stamp duty.  End

Edited by Ashish Shirke

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