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Informist, Friday, Mar. 6, 2026

NEW DELHI – Karnataka is looking to keep the fiscal deficit at 2.95% of gross state domestic product in the upcoming financial year, the same as 2025-26 (Apr-Mar), according to the state's Budget presented Friday. The state also laid out a medium-term fiscal plan, under which it intends to lower the fiscal deficit to 2.60% of GSDP by FY30.

"Karnataka continues to demonstrate strong fiscal performance and robust revenue mobilisation capacity," Chief Minister Siddaramaiah, who also holds the finance portfolio, said in his 17th Budget speech. "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."

The state has pegged a fiscal deficit of INR 974.49 billion for FY27, higher than the revised estimate of INR 912.61 billion for the current year. As part of its rolling targets, Karnataka has projected its fiscal deficit at 2.81% of GSDP in FY28 and 2.72% of GSDP in FY29.

Total liabilities at the end of the year are estimated at INR 8.24 trillion, amounting to 24.94% of GSDP. "Both the fiscal deficit and total liabilities are within the limits prescribed under the Karnataka Fiscal Responsibility Act. This reflects the State's continued commitment to responsible fiscal management," the chief minister said.

The state's borrowing in FY27 is projected at INR 1.32 trillion, around 14% higher than the revised estimate of INR 1.16 trillion for FY26. "This upward trajectory reflects the State's conscious and calibrated use of market borrowings, institutional loans and other debt instruments to finance capital formation across various priority socio-economic sectors," the state's Medium Term Fiscal Plan said. 

The state has projected revenue receipts for FY27 at INR 3.15 trillion, 13.6% higher than the revised estimate for FY26. The state's own tax revenue is seen growing nearly 14% to INR 2.20 trillion, while the state's non-tax revenue is seen falling 8.6% to INR 160 billion.

Siddaramaiah said the sales tax on liquefied natural gas will be cut to 5% from 14.34%. This will promote the use of LNG in industrial and transport sectors, he said. The commercial tax revenue target for FY27 is INR 1.250 trillion.

The state will also bring in an alcohol-in-beverage-based excise duty structure from April. There will be a uniform level of excise duty, whereas the alcohol-in-beverage-based excise duty will be levied within a defined range based on ex-factory price slab basis, Siddaramaiah said. "We will ensure that the price changes are gradual and not disruptive. The system of levying uniform excise duty based on the alcohol content per litre will be introduced in stages in the next three to four years," the chief minister said. The revenue collection target from state excise for FY27 is INR 450 billion.

Karnataka expects a fall of INR 150 billion in goods and services tax collection in FY27 because of GST rate cuts announced in September. "Prior to rationalisation, the state's average monthly GST revenue collections in FY26 were registering a growth, net of refunds, of about 10%," the chief minister said. "However, following the implementation of rate rationalisation, the average monthly growth has moderated sharply to around 4% in FY26." The rate restructuring of GST has resulted in a reduction in overall GST collections by around INR 100 billion in FY26, the chief minister said.

The total net expenditure for FY27 is projected at INR 4.48 trillion, up from the revised estimate of INR 3.95 trillion for the current year. Of this, revenue expenditure for FY27 is pegged at INR 3.38 trillion, up 11.6% from the revised estimate for FY26.

Siddaramaiah said the government has focused on increased capital investment, infrastructure development, and long-term economic transformation alongside welfare programmes. The capital expenditure for FY27 is projected at INR 746.82 billion, up 13.2% from this year.

The state announced a new scheme called "Mukhya Mantri Saura Krishi Yojane" with an allocation of INR 105 billion, under which 3,000 megawatt of solar energy capacity will be added. The chief minister also announced an electricity subsidy of INR 192.90 billion for 3.6 million irrigation pump sets.

The state will hold a feasibility report for construction of a second international airport in Bengaluru. The Budget also earmarked INR 2 billion for development of seven domestic airports in the state.

The state will ban the usage of social media for children under the age of 16, with an objective of preventing adverse effects of increasing mobile usage on children, the chief minister said.  End

Reported by Shubham Rana

Edited by Ashish Shirke

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