BENGALURU: Chief Minister Siddaramaiah, presenting his record 17th budget as finance minister for 2026-27 in the Assembly on Friday, made a prudent move, striking a balance between development and populist welfare schemes, with the five guarantees continuing to get a high allocation of Rs 51,286 crore.
To raise money for his budget, he revised upward revenue target for the sectors – including the lucrative excise – and created room for raising loans within the framework of Karnataka Fiscal Responsibility Act (KFRA) 2002 by projecting the Gross State Domestic Product (GSDP) at Rs 33,05,500 crore.
Announcements, such as financial assistance of Rs 5,000 for Vaishnodevi pilgrims with an allocation of Rs 5 crore and construction of a new choultry in Varanasi, revealed an attempt to shed Siddaramaiah’s “minority appeasement” image, and the proposal to ban social media for children below 16 years of age showcased a novelty.
Reducing sales tax on environmentally friendly Liquefied Natural Gas (LNG) from 14.34% to 5% to promote its use in industrial and transport sectors seems to be a breakthrough for the sector.He said the Alcohol-in-Beverage (AIB)-based excise duty structure – a global gold-standard for alcohol taxation – will be implemented from April as it directly targets the alcohol content which is the primary source of negative externalities.
The excise duty structure will be uniform, and additional excise duty will be imposed within specified limits based on ex-factory price lists,ensuring gradual price changes rather than sudden fluctuations,he explained. Besides, the existing 16 excise slabs will be reduced to eight.
Allocation of Rs 4,291 crore to address regional imbalance based on the Prof M Govinda Rao Committee report,Rs 5,000 crore against the action plan for Kalyana Karnataka development, and Rs 7,000 crore for Bengaluru are likely to give a fillip to infrastructure development in the state.
Fiscal deficit estimated at Rs 97,449cr, says CM
The outlay is Rs 4,48,004 crore with a revenue deficit of Rs 22,957. Loans are pegged at Rs 1,32,190 crore, including Rs 1,22,340 crore from the open market. It is Siddaramaiah’s third consecutive revenue deficit budget and the trend is likely to continue up to 2028-29 as the state has to sustain the loss due to GST rate rationalisation, the five guarantees and the delays due to hindrances in mining operations, according to finance department officials. As against the Budget Estimates of
Rs 4,09,549 crore for 2025-26, revised at Rs 3,95,307, this time there is an enhancement by 9.38% at Rs 38,455 crore, resulting in expansion of the budget size to Rs 4,48,004 crore.
Revised revenue targets seemed ‘unrealistic’ against those achieved during the previous fiscal. This is evident from the revenue target set for commercial taxes at Rs 1,25,000 crore for 2026-27 is a whopping 24% hike in target as compared to collections of Rs 1,00,462 crore up to February of FY 2025-26. Motor vehicle tax is Rs 15,500 crore (33%) against Rs.11,630 crore collected.
“Under the 15th Finance Commission, Karnataka’s share divisible pool of Central taxes declined sharply to 3.647% from 4.713% recommended by the 14th Finance Commission. This reduction of nearly 23% resulted in an estimated loss of around Rs 65,000 crore over the six-year award period of the 15th Finance Commission. The special grant of Rs 5,495 crore and state-specific grants of Rs 6,000 crore have not been released,” the CM said.
The 16th Finance Commission has submitted its report for the award period 2026-31 and has recommended a tax devolution share of 4.131% for Karnataka, an increase of 13% over the 15th Finance Commission recommendation. While the state was expecting the full restoration to 4.71% as recommended by the 14th FC, the 16th FC’s recommendation is a partial redressal, he said.
Siddaramaiah said the fiscal deficit is estimated at Rs 97,449 crore, which is 2.95% of GSDP, and total liabilities at the end of the year are estimated at Rs 8,24,389 crore, amounting to 24.94% of GSDP which is within the framework of KFRA.