Karnataka CM Siddaramaiah blames Centre’s policies for state’s revenue strain

Bengaluru: Chief Minister Siddaramaiah on Wednesday defended the state Budget in the Assembly, backing his arguments with fiscal data while squarely attributing Karnataka’s revenue constraints to the Centre’s policies, including GST changes and denial of compensation and central grants.

Maintaining that the Budget reflects both fiscal prudence and social commitment, the CM said the state continues to prioritise welfare while adhering to financial responsibility norms despite “structural constraints” imposed by the Centre.

“Karnataka’s fiscal deficit for 2026–27 is estimated at 2.95% of GSDP, within the 3% limit, while total liabilities stand at 24.94% of GSDP, below the 25% threshold. In contrast, Centre’s fiscal deficit is projected at 4.3% of GDP, exceeding the 4.2% guideline, and its total liabilities stand at 55.6% of GDP, above the recommended 40%,” he noted.

Drawing comparisons with other states, the chief minister said Karnataka remains fiscally prudent, with deficit levels lower than Andhra Pradesh (4.5%), Kerala (3.8%), Tamil Nadu (3.5%) and Maharashtra (3.0%). He also highlighted stronger economic growth, noting that Karnataka’s GSDP is projected to grow at 8.1%, compared to the national GDP growth of 7.4%, indicating better economic performance.

Siddaramaiah said the state’s fiscal space had been squeezed due to central decisions and resulted in revenue deficit budget.

“GST growth dropped from 10% to 4% following rate reductions, impacting revenues. Further, the discontinuation of GST compensation after 2023–24 has resulted in a Rs 10,000 crore loss, expected to rise to Rs 15,000 crore in 2026–27.

Rejecting criticism that the government was running on debt, Siddaramaiah said borrowing stood at Rs 1.32 lakh crore against a Budget size of Rs 4.48 lakh crore, and was being used for welfare and development.

“Karnataka’s borrowings stand at Rs 8.24 lakh crore. The Centre’s debt rose from Rs 53.11 lakh crore in 2014 to Rs 218.63 lakh crore by March 2026. The Modi government borrowed as much as Rs 165 lakh crore in 12 years. The previous BJP government in state had left Rs 5.53 lakh crore in debt and neglected development,” charged Siddaramaiah.

The state’s capital expenditure is Rs 84,000 crore (20.72% of budget) and the Centre’s is Rs 11.11 lakh crore (23.05% of budget). “We are focussing on infrastructure and development. We have spent Rs 1.31 lakh crore on guarantees till date to ensure social justice and social empowerment,” he defended.