New Delhi: Chief Minister Siddaramaiah Friday presented the third consecutive revenue deficit budget for Karnataka, as drying up capital inflows from the Centre, continued patronage to flagship guarantee schemes and rising demand for big-ticket infrastructure projects has led to an acute funds crunch, forcing higher borrowings.
Presenting the 16th state budget, Siddaramaiah estimated that the revenue deficit was Rs 19,262 crore but still managed to set aside Rs 51,034 crore for the five guarantees of the Congress government for the 2025-2026 fiscal.
“The Union government’s failure to fully compensate for GST revenue loss, non-devolution of cesses and surcharges and lower tax devolution from the 15th Finance Commission compounded the state’s fiscal challenges,” he said.
Siddaramaiah’s commentary and the budget provisions add to the growing voices of discontent among non-Bharatiya Janata Party-ruled states, especially in the south of India, who have accused the Prime Minister Narendra Modi-led central government of short-changing high-performing states.
Non-BJP states, led this time by Tamil Nadu CM M.K. Stalin, are mobilising support over delimitation, devolution of taxes, Hindi imposition and other matters which they see as a threat to their respective identities.
Siddaramaiah has been trying to corner Modi over the declining share in central taxes, saying it is pushing states like Karnataka into a debt trap.
“While economically advanced states are committed to supporting poorer states, it should not be at the expense of their own residents or economic efficiency,” Siddaramaiah said in his budget speech.
According to the CM, Karnataka will borrow a staggering Rs 1.16 lakh crore in the coming fiscal as against Rs 1,05,246 crore in 2024-2025. As a result of higher borrowings, the state’s total liabilities would surge to Rs 7,64,665 crore as against Rs 6,65,095 crore last year, registering a nearly 15 percent increase.
Siddaramaiah managed to keep the fiscal deficit under permissible limit by increasing the budget outlay to Rs 4,09,549 crore as against Rs 3,71,383 crore earlier, registering a 10.27 percent increase.
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‘Catchy slogans, no substance’
The Congress government stormed to power in Karnataka in 2023 on the back of its guarantee schemes. The high cost of funding the five guarantees has apparently left little for other development works and added to growing anger among MLAs denied grants or projects in their respective constituencies.
In this budget, the government has set aside Rs 81,937 crore for capital expenditure or money spent to create long-term assets and boost economic growth, which is around 20 percent of the total expenditure.
The government had set aside Rs 55,877 crore for the same last year. However, it remains unclear if interest payment on loans, specified last year, have been included in the capital expenditure account this time.
Budgetary estimates of revenue expenditure increased to Rs 3,11,739 crore as against Rs 2,83,928 crore (revised estimates) in 2024-25, registering an increase of nearly 10 percent.
The BJP criticised the Siddaramaiah government for filling up the budget speech with catchy slogans and little substance to give reprieve to citizens.
“The budget book is filled with catchy slogans and quotes from poets, but there is no contribution to the radical development of education, health, water resources, and rural development projects,” V. Sunil Kumar, former minister and BJP leader, posted on X.
The BJP leader also pulled up the freebie-oriented governance model of the Congress and its alleged prioritisation of minority appeasement over larger development goals.
Basavaraj Bommai, former CM of Karnataka and BJP MP, said the budget “shows a fiscal deficit of 2.95 percent, but in reality it will exceed 3 percent of the state’s GDP”.
“The figures were merely adjusted to appear favourable. Additionally, the state’s total debt has now reached Rs 7,64,665 crore, which amounts to nearly 25 percent of GSDP, indicating an impending financial crisis,” he added.
‘Resource mobilisation’
Siddaramaiah has tried to rake in additional revenue through state taxes like excise and other initiatives, ThePrint reported earlier.
The budget proposes to allocate unused liquor licences to help draw more revenue, increasing the revenue target for the excise department to Rs 40,000 crore in the coming fiscal.
Further, the government has proposed to create an Infrastructure Investment Trust (InvIT) that is expected to generate an investment of Rs 5,000 crore and utilise the same for different schemes.
The Karnataka government had also employed the services of Boston Consulting Group and another committee headed by a retired IAS officer to identify resources that can bring in revenue to the state.
The CM has increased revenue targets for mines & geology, excise, stamps and registration, and commercial tax departments, among others, to bring in much needed funds.
Karnataka gets money from five main avenues: 52 percent from state tax revenue, 4 percent each from non-tax revenue and central government grants, 13 percent from share in central taxes and 27 percent from borrowings.
(Edited by Nida Fatima Siddiqui)
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