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Siddaramaiah presents budget with ₹4.48 lakh crore outlay, flags GST losses
Karnataka CM Siddaramaiah presents a ₹4.48 lakh crore budget for 2026-27, focusing on growth, welfare, and fiscal discipline amid rising debt and revenue deficits.
Karnataka Chief Minister Siddaramaiah on Friday presented his third consecutive budget with an outlay of ₹4.48 lakh crore for 2026-27. Karnataka’s fiscal deficit and debt-GSDP ratio in 2026-27 are expected to be 2.95% and 24.94% respectively. For the 2025–26 financial year, the fiscal deficit was recorded at 2.9% of GSDP while the debt-to-GSDP ratio stood at 24.91%.
“Within these (central tax devolutions) constraints on revenue availability, the state has carefully prioritised its expenditure to balance growth, welfare and fiscal discipline”, Siddaramaiah, who also holds the finance portfolio, said in the assembly while presenting his record 17th budget.
The 2026-27 budget outlay for the state is 13.3% higher than the ₹3.95 lakh crore in the 2025-26 Revised Estimate (RE) numbers. The 2025-26 RE spending is 2.85% lower than the 2025-26 BE numbers.
For 2026-27, revenue receipts are expected to be ₹3,15,050 crore while revenue expenditure is estimated at ₹3,38,007 crore, entailing a revenue deficit of 0.69% of GSDP. The government also plans to recruit 56,432 employees. This move is expected to increase revenue expenditure in the coming years, adding to the burden the new pay commission awards might bring next year.
The state’s own tax revenue is projected to rise from ₹1,93,100 crore in the revised estimate for 2025–26 to ₹2,20,000 crore in 2026–27, an increase of nearly 14%.
Capital expenditure has been set at ₹74,682 crore, compared with ₹71,336 crore in the previous budget estimate. Capital expenditure for 2026–27 includes ₹40,000 crore for the proposed tunnel road project in Bengaluru.
Receipts from the Union government are expected to increase from ₹62,933 crore in 2025–26 to ₹79,050 crore in 2026–27. The rise follows the recommendation of the Sixteenth Finance Commission to increase Karnataka’s share of the divisible tax pool to 4.131%, up from 3.647% recommended by the Fifteenth Finance Commission. Siddaramaiah said the increase represented a “partial redressal of the injustice caused to the State”, adding that Karnataka expected its share to be restored to 4.71%, as recommended by the Fourteenth Finance Commission. He also accused the Union government of not adhering to the federal system of governance and said the state had been treated unfairly. “Our state is at the forefront in all sectors of the nation’s development; it is one of the key states that contributes the highest tax revenues,” he said.
Higher tax devolution is expected to partly offset losses resulting from Goods and Services Tax rate rationalisation carried out in September 2025. The changes caused a revenue shortfall of about ₹10,000 crore in 2025–26 and are expected to result in a shortfall of around ₹15,000 crore in 2026–27.
Karnataka, along with seven other states, has asked the GST Council to create a revenue protection mechanism to compensate states for losses arising from GST rate changes.
Despite slower GST growth, Karnataka’s economy expanded by 8.1% in 2025–26, higher than the national growth rate of 7.4%. In the previous year, the state recorded 7.4% growth compared with the national rate of 6.4%.
During 2025–26, agriculture grew by 9.1%, industry by 6.7%, and services by 8.1%. Growth in the services sector slowed from 8.9% recorded in 2024–25. “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,” Siddaramaiah said.
Foreign direct investment into Karnataka rose 2.6 times during the first half of 2025–26 to $9.4 billion, while investments in Maharashtra, Gujarat and Delhi declined, the Budget said.
The government has continued funding its five guarantee schemes, spending ₹1,21,598 crore so far. Around ₹52,000 crore has been allocated for the programmes. Among the schemes, Gruha Lakshmi is estimated to cost ₹28,608 crore, Gruha Jyothi ₹10,578 crore, Yuva Nidhi ₹913 crore and Anna Bhagya ₹6,200 crore. The Shakthi scheme, which provides women free bus travel, is estimated to cost ₹5,300 crore.
