It has been well-recognised that CM Siddaramaiah is a perceptive finance minister and an accomplished budget manager, which he has repeatedly proved with his long experience of being in the fiscal discipline and managing the state’s finances.
This is one of the budgets that exemplifies the political and management skills of the finance minister. Fiscal management was crucial as more resources were needed to fulfil the welfare promises (guarantees) and maintain the tempo of growth at the same time, maintaining the state’s fiscal stability.
Karnataka stands at the 10th place in the Fiscal Health Index, issued by the NITI Ayog recently and that is a good achievement by the state.
The total expenditure for 2025-26 estimated in this budget is Rs 4.09 lakh crore with revenue expenditure of Rs 3.11 lakh crore, capital expenditure of Rs, 71,000 crore and loan repayment of Rs 26,000 crore. The revenue receipts are estimated at Rs 2.92 lakh crore with own tax revenue of Rs 2.08 lakh crore, non-tax revenue of Rs 16,500 crore and central receipts of Rs 67,000 crore.
The non-tax revenue collection has been better than expected for 2024-25 and it may exceed Rs 14,000 crore, a growth of 10.5%. But one must note that the non-tax revenue as a percentage of GSDP and as a percentage of own tax revenues have stagnated over the last few years. Certainly, there was a scope to enhance receipts through tax and non-tax sources.
The gap between last year’s budget estimate and revised estimate shows that own tax revenue fell short of Rs 9,000 crore and the share of central taxes increased by about Rs 2,000 crore. The state’s dependence on the central government is only Rs 67,000 crore -- about 23% of the total revenue, a point of focus in the budget.
Karnataka’s share of tax devolution was reduced to 3.6% in in the 15th Finance Commission as against 4.7% in the previous commission, translating to a revenue loss of around Rs 12,000 crores per year. This was mainly due to the state team’s ineffective arguments and failure to convince the Finance Commission of our needs and competencies.
The estimated receipts on capital account are around Rs 1.16 lakh crore with an estimated capital outlay of Rs 68,000 crore. With this, the fiscal deficit is estimated to be Rs 90,000 crore, which is above 20% of the total revenue estimated. Certainly, it is within the FRBM norm as it comes just to 2.95 % of GSDP. However, the total liabilities at the end of 2025-26 are estimated to be Rs 7.64 lakh crore. That is quite high, but possibly manageable by Siddaramaiah.
The management of the budget across sectors needs a critical look. The priorities of welfare and development-oriented budget set forth by the CM include all the points that a seasoned FM will put in the election promises. These include: Welfare Programmes for the weaker sections, agriculture, urban development, job creation and reforms in governance.
Karnataka’s aggregate growth is always at the median across states and contributes above 8% to GDP. The GSDP growth in 2024-25 was 7.4 per cent, slightly ahead of the country’s GDP growth. A major contributor to this is the services sector, which contributes a 66% share in total gross value addition, and agriculture contributes almost next to the services sector. But their allocations are not as per their contribution to the state economy.
Agriculture and rural development are among the main priorities indicated in the initial pages of the budget. Therefore, the 14% allocation for agriculture is below the allocation for social welfare (15%), a favourite sector of the CM. Last year, the agricultural sector growth was 4.9%. The allocation of Rs 44,000 crore has been increased to Rs 51,300 crore, an increase of about 15% — or about Rs 34,000 per hectare.
Overall, the CM’s budget located the correct spots for igniting growth and development. Still, the emphasis is more on welfare schemes, results of which are usually decided by implementation. It is well managed in terms of fiscal discipline, but may not be effective in terms of equity.