Karnataka's budget for 2026-27 has a total outlay of Rs 4.48 lakh crore, Chief Minister Siddaramaiah, who handles the Finance portfolio, said while presenting the budget on Friday, March 6. He also launched a sharp critique of the Union government for shortchanging the state on GST revenue and Finance Commission allocations.
Presenting his record 17th budget, Siddaramaiah said during his speech in the Karnataka Assembly that the budget was a “live document echoing the dreams and confidence” of farmers, marginalised people, workers, women, vulnerable groups, minorities, students, youth, traders and business people.
“We must move forward with clarity regarding whom our policies and allocations are intended to benefit and whether they are conceived with noble intentions,” Siddaramaiah said. The Budget session ends on March 27.
Siddaramaiah criticised the Union government for their reduced share in Centrally Sponsored Schemes and discriminatory allocation in Central Sector Schemes.
He also spoke about factors which had led to “additional burden and pressure on the state exchequer” such as “injustice” due to the Fifteenth Finance Commission’s revenue sharing formula, non-implementation of special grants recommended by the same Commission, and the untimely rationalisation of GST rates.
Of the total outlay, Rs 25.37 lakh crore has been allocated for the Scheduled Caste Sub-Plan and Rs 12.82 lakh crore for the Tribal Sub-Plan.
The children’s budget received an allocation of Rs 63,135 crore and the gender budget Rs 94,663 crore.
Education was allocated Rs 47,224 crore, women and child welfare Rs 34,929 crore, health Rs 17,817 crore, and social welfare Rs 18,612 crore.
Announcements
The budget document said that the state government would set up an Adivasi Development Corporation as well as a Scheduled Tribes Commission.
It also said that the government would take strict action to prohibit drugs in schools, colleges and universities. Mental health counselors would be appointed at the Block Resource Centre level to reduce mental pressure among students.
A scholarship of Rs 30,000 would be given to girls pursuing higher education after studying in government schools and colleges.
Expenditure
In 2026-27, the state government has estimated an expenditure of Rs 4,48,004 crore, including revenue expenditure of Rs 3,38,007 crore, capital expenditure of Rs 74,682 crore, and loan repayment of Rs 35,316 crore.
The revised estimate of total expenditure for the previous fiscal year is Rs 3,95,307 crore.
The revenue deficit for 2026-27 is estimated to be Rs 22,957 crore.
The fiscal deficit is estimated at Rs 97,449 crore, which is 2.95% of the Gross State Domestic Product (GSDP), and total liabilities at the end of the year are estimated at Rs 8,24,389 crore, amounting to 24.94% of GSDP.
GSDP is a measure in monetary terms, the sum total volume of all finished goods and services produced during a given period of time.
Under the Karnataka Fiscal Responsibility Act 2002, the state government must contain the fiscal deficit to within 3% of the GSDP, and ensure that the total liabilities at the end of the last financial year do not exceed 25% of the estimated GSDP for that year.
State economic performance
Siddaramaiah said that the state’s GSDP was projected to grow at a real rate of 8.1% in 2025-26, while the country’s GDP growth is expected to be more than 7.4%. “This robust growth in the economy has been possible due to the comprehensive growth of all sectors of the state,” Siddaramaiah said.
He also said that agriculture grew 9.1% in 2025-26, while industries registered a growth of 6.7% and the services sector 8.1%.
Revenues
Siddaramaiah said that the state’s own revenue registered a growth of 8.3% in the revised estimates (RE) for 2025-26 compared to the revenue collection in 2024-25.
The Chief minister said that the state’s revenue collection had declined due to the
“unexpected rationalization” of GST rates by the Union Government in the middle of the financial year.
Before GST rationalization, the state's average monthly GST revenue (net of refunds) collection had registered a growth of 10% in 2025-26. After rate rationalization, it dropped to 4%.
The proposed rate revision led to an estimated shortfall of Rs 10,000 crore in the state's GST collection for the current year, Siddaramaiah said, adding that the revenue shortfall is estimated to be Rs 15,000 crore in the next year.
“The decline in GST collection has created a lot of financial pressure in the states. While the states are facing revenue loss, the central government is collecting revenue by levying cess and other taxes on narcotics and luxury items, and the entire amount of this revenue will go to the central government's exchequer,” Siddaramaiah said.
However, Siddaramaiah also made it clear that the state government supported the rationalization of GST rates in principle and had submitted a joint memorandum to address revenue loss to the GST Council along with seven other states.
“We will continue to urge the Central Government to provide necessary compensation to the states to compensate for the revenue loss caused by GST rationalization,” he said.
He said that although the 14th Finance Commission had recommended a state tax share of 4.7 per cent, the 15th Finance Commission fixed it at 3.6 per cent, which is 23% per cent lower.
He said that the total loss to the state during the six years of the 15th Finance Commission was around Rs 65,000 crore. He also said that the Union government had not released special grants of Rs 5,495 crore and state-centric grants of Rs 6,000 crore recommended by the 15th Finance Commission.
Siddaramaiah said that the 16th Finance Commission had “partially remedied the injustice in tax distribution to the state” as it had recommended a tax share of 4.131% for Karnataka, which is an increase of 13% per cent over the share recommended by the 15th Finance Commission.