Karnataka Chief Minister Siddaramaiah recently addressed concerns regarding the state’s fiscal health, emphasizing its capacity to manage financial obligations despite unresolved GST compensation claims from the central government. According to state finance department records, Karnataka’s GST revenue shortfall for fiscal years 2022–23 and 2023–24 stands at approximately ₹26,000 crore, a figure contested by the central government. Data from the Ministry of Finance indicates that ₹15,000 crore was disbursed to the state during this period, leaving a gap of ₹11,000 crore under the GST compensation mechanism.
The state’s own tax revenue collection has shown consistent growth, rising by 12.3% year-on-year in 2023–24, as per Karnataka’s Economic Survey. Non-tax revenue, including fees and royalties, contributed ₹9,200 crore in the same period, reflecting a 7.8% increase compared to the previous fiscal year. These figures align with the state’s assertion of improved revenue mobilization, despite delayed central transfers for key welfare schemes.
Central allocations under schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and PM-KISAN reportedly fell short by 18% in 2023–24, according to state government submissions to the NITI Aayog. Karnataka received ₹8,300 crore against a claimed ₹10,100 crore, impacting liquidity for rural development projects. However, the state allocated ₹44,000 crore—22% of its 2023–24 budget—to social welfare programs, including subsidies for education, healthcare, and farmer support, funded through its own treasury.
Karnataka’s debt-to-GSDP ratio, a critical indicator of fiscal sustainability, stood at 23.1% in March 2024, below the 25% threshold recommended by the 15th Finance Commission. State debt liabilities totaled ₹5.8 lakh crore, with interest payments consuming 14.6% of revenue receipts, marginally lower than the 15.2% national average for major states, as per Reserve Bank of India (RBI) data.
The Comptroller and Auditor General (CAG) 2022–23 report noted Karnataka’s capital expenditure grew by 9.4%, focusing on infrastructure projects like the Bengaluru Metro Phase III and irrigation works. Despite delays in central grants for these projects, the state redirected ₹3,200 crore from its contingency fund to avoid disruptions, according to Public Works Department records.
Economists highlight Karnataka’s diversified revenue base, with IT and biotechnology sectors contributing 38% to its GSDP. Export revenues from these sectors surged to ₹4.1 lakh crore in 2023–24, a 14% year-on-year increase, bolstering state coffers. Additionally, stamp duty and registration fees rose by 19% due to a rebound in real estate transactions, generating ₹13,500 crore in 2023–24.
The central government has refuted claims of fund withholding, citing adherence to the recommendations of the Finance Commission. Union Finance Ministry data shows Karnataka received ₹1.02 lakh crore in tax devolution in 2023–24, a 10% increase from the previous year. However, state officials argue this falls short of the ₹1.25 lakh crore projected under revised resource-sharing formulas.
Karnataka’s fiscal management strategies include leveraging green bonds for renewable energy projects, raising ₹1,200 crore in 2023–24, and digitizing tax collection systems to reduce leakage. These measures contributed to a 21% rise in commercial tax compliance, as reported by the state’s Commercial Taxes Department.
Analysts from credit rating agency ICRA note Karnataka’s ‘AA’ stable rating reflects its robust internal revenue mechanisms and controlled expenditure growth. The state’s revenue deficit narrowed to 0.8% of GSDP in 2023–24, against a budgeted 1.2%, indicating tighter fiscal discipline.
While political debates over Karnataka’s finances persist, economic indicators suggest the state retains operational liquidity. Daily treasury reports show average cash balances of ₹1,500–2,000 crore in Q1 2024, sufficient to meet routine obligations. Nevertheless, unresolved disputes over GST compensation and shared central schemes remain pivotal to long-term fiscal planning.
