BENGALURU: The Centre-State stalemate is likely to continue as Chief Minister Siddaramaiah presents his 17th budget for Karnataka on Friday. The numbers show it will be a tightrope walk for Siddaramaiah, who will have to factor in deep cuts in revenue from the Centre.
The budget is likely to be marked by the state’s non-cooperation on release of grants for Central schemes, and loss of revenue due to GST rate rationalization.
Allocations under Grant-in-Aid (GIA) and contributions from the Centre show a staggering negative growth of -27.25 per cent; against the budget estimate (BE) of Rs 16,000 crore, the Centre has released Rs 8,787.68crore (52.92%) up to January 2026.
Besides the loss of about Rs 9,000crore revenue due to GST rate rationalisation, the State will bear a burden of over Rs 2,200crore as part of its 40 per cent share to implement the VB-G RAM-G employment guarantee scheme, and Rs 13,000crore shortfall of grants towards Jal Jeevan Mission.
The Policy and Planning Commission headed by MLA BR Patil submitted a report to the government, recommending that the budget speech include the Centre’s non-cooperation with the State on funds for Central schemes, and lack of response to Karnataka’s request to start an AIIMS in Raichur.
Revenue shortfall from the state is Rs 15,000crore to Rs 18,000crore for 2025-26, and is mostly attributed to the Revenue department’s initiative of e-khata, which is compulsory for registration of properties. The Stamps and Registration department collected Rs 20,000cr as against an estimate of Rs 28,000cr in January. Commercial taxes also showed a bit of sluggishness (6.96 per cent growth year on year).
Experts say it will be a revenue-deficit budget for 2nd consecutive year
All these are likely to impact the size of the budget for 2026-27, which may be enhanced by 5-6 per cent to Rs 4.30 lakh crore from Rs 4.09 lakh crore for 2025-26. Experts say it will be a revenue-deficit budget for the second consecutive year. Capital expenditure is likely to be Rs 80,000 crore to boost infrastructure development, according to a source.
Sensing an impending drought situation, with temperatures likely to rise 2-2.5 degrees Celsius in the next decade in Central and North Karnataka, the CM is likely to announce funds for implementing a ‘green wall’ from Belagavi to Bidar, to check desertification. It has sought Rs 15 crore for the feasibility study.
Amid the power-sharing tussle with DCM DK Shivakumar, CM Siddaramaiah will be under a lot of stress to placate Congress MLAs. The other challenges include pruning the five guarantees to continue with flagship programmes which require an allocation of over Rs 8,000 crore annually, the contractors’ demand to release Rs 37,000crore in dues and allocation of SC/ST TSP grants to SC/STs, in proportion to their population. The government announced recruitment to 56,000 vacancies, which will be an additional financial burden. It is likely to adapt recommendations of the Karnataka Regional Imbalances Redressal Committee led by economist Prof M Govinda Rao, seeking Rs 43,914 crore for the 2026-2031 period.
Mining is one sector which would have brought in revenue, but lack of coordination between forests and the mines and geology departments hinders operations even if e-auctioning has been done, an expert observed. “We are losing Rs 12,000 crore revenue due to GST rate rationalisation, which was implemented mid-term, when all states had come out with their spend plan. Karnataka, despite being the second-highest GST collector, is a big loser. However, we will work out a strategy to improve our revenues with taxes, and the size of the budget will be around Rs 4.4 lakh crore, a regular 10 per cent hike,” stated CM’s economic adviser Basavaraj Rayaraddi, adding that revenue shortfall by the end of the financial year would be around Rs 18,000 crore against the budget estimate for 2025-26.
MAJOR RECEIPTS COLLECTION
Own Tax Revenue: Rs 1,55,405.57cr (74.68% of BE, Rs 2,08,100cr)
Commercial Taxes: Rs 90,220.89 (75.18%, Rs 1,20,000cr)
State Excise: Rs 33,370.54 cr (83.43%, Rs 40,000cr)
Motor Vehicles: Rs 10,594.34cr (70.63, Rs 15,000cr)
Stamps and Registration: Rs 20,227.18cr (72.24% ,Rs 28,000cr)
Own Non-Tax Revenue: Rs 14,888.43cr (90.23%, Rs 16,500cr)
Devolution from GOI: Rs 41,567.36cr
(80.13% ,Rs 51,876.54cr)GIA & Contributions:
Rs 8787.68cr (54.92%, Rs 16,000cr)
Revenue Expenditure: Rs 3,11,738.73cr (BE) spent - Rs 2,16,584.35 (69.48%)
