BENGALURU: Chief Minister Siddaramaiah will present his record 17th budget for the fiscal year 2026-27 on Friday, limiting borrowings and keeping the total liabilities at 25 per cent of the Gross State Domestic Product (GSDP), as mandated by the Karnataka Fiscal Responsibility Act (KFRA) 2002.
Siddaramaiah, who holds the Finance portfolio, broke the record of late D Devaraj Urs as the state’s longest serving CM. With expectations of huge revenue expenditure, the CM is likely to present a revenue-deficit budget, but a realistic one in terms of revenue collection, for the second consecutive year. The shortfall for 2025-26 was Rs 18,000 crore.
For 2025-26, the GSDP was projected at Rs 30,70,103 crore (Budget Estimate) with total liabilities at Rs 7,64,655 crore, which was 24.91% of the GSDP, and borrowing at Rs 1.16 lakh crore. This time, with GSDP projected at about Rs 34,38,000 crore, he is likely to create room for borrowings of over Rs 1.25 lakh crore, and managing total liabilities at 24.98% of the GSDP, according to sources. “Managing liabilities of anything less than 25 per cent is not alarming for fiscal health, provided it means quality expenditure, especially on education and health,” suggested noted economist Prof M Govindarao.
The High Power Committee for Redressal of Regional Imbalances in Karnataka recommended a sum of Rs 43,914 crore to address developmental disparities over the next five years (2026-27 to 2031-32). It is to be seen whether the recommendations are reflected in the budget.
Revenue deficit of Rs 6kcr estimated for 2026-27
Apart from this, the Resource Mobilisation Committee (RMC), headed by retired IAS officer KP Krishnan, will boost fiscal health, with focus on asset monetisation, tax reforms and enhancing non-tax revenue.
The state Policy and Planning Commission headed by MLA BR Patil recommended resumption of free bicycles for Class VIII girl students, to check the dropout rate. The commission has also given ammunition to target the Centre for not releasing grants for Central schemes.
Siddaramaiah is likely to announce various schemes, including naming of all Gram Panchayats after Mahatma Gandhi, which has no financial implications, as a fitting response to the Centre’s repeal of MGNREGA and replacement with VB-G RAM-G. The state has to allocate its share of 40 per cent, or around Rs 2,200 crore, for implementation of VB-G RAM-G.
On the other hand, Karnataka is set to receive Rs 63,050 crore in tax devolution, after the 16th Finance Commission increased Karnataka’s share to 4.13 per cent, from 3.65 per cent in the 15th FC -- a gain of Rs 7,387crore. The size of the budget will be around Rs 4.35 lakh crore, as compared to Rs 4.09 lakh crore for 2025-26. A revenue deficit of around Rs 6,000 crore is estimated for 2026-27.
“The CM is giving a pro-people budget for all sections of society, including students, women, rural and urban populace, and will be development-oriented, with an impetus on infrastructure creation. He will strictly follow fiscal discipline, adhere to KFRA with total liabilities below 25 per cent of the GSDP and fiscal deficit below 3 per cent. The Central government’s debt to GDP ratio is 56 per cent. Unfortunately, the state could not achieve a revenue-surplus budget, and this time there will be a remarkable allocation against capital expenditure which will cross Rs 80,000 crore,” CM’s economic adviser Basavaraj Rayaraddi said.
He said the budget will focus on collecting over Rs 25,000 crore in additional revenue from the mining sector and introduce users’ maintenance fee on several services.
According to the Mid-Term Financial Estimates 2025-2029 report, revenue receipts in 2026-27 are estimated to be around Rs 3.38 lakh crore. Of this, its own source of tax collection is expected to be around Rs 2.50 lakh crore. Revenue expenditure is estimated to reach around Rs 3.45 lakh crore, while a revenue deficit of around Rs 6,000 crore is estimated for 2026-27.