Karnataka Budget outlay is estimated to surpass Rs 4 lakh crore in FY 25-26, revenue deficit to come down

Karnataka CM Siddaramaiah presenting the state Budget 2025.

The Karnataka Budget presented amidst increasing financial stress owing to the welfare programmes shows the outlay crossing Rs 4 lakh crore for the first time.

The budget presented by Chief Minister Siddaramaiah, who is also the finance minister estimated the total size of the 2025-26 budget is estimated at Rs 4,09,549 crore, an increase of 10.3 percent compared to the 2024-25 budget.

The state's revenue receipts include tax revenue, non-tax revenue, central grants, and tax devolution. The tax revenue is projected at Rs 2,08,100 crore—an increase of 9.6% over 2024-25. Non-tax revenue is expected to generate Rs 16,500 crore, a 22.2% increase. The state's share of central taxes is estimated at Rs 51,877 crore. More than Rs 1,16,000 crore will come from gross borrowings.

Siddaramaiah, who is presenting his 16th budget, said that the government will invest over Rs 54,000 crore in the next three years to meet state capital Bengaluru’s infrastructure needs. This includes projects such as 120 km of flyovers and grade separators, 320 km of new roads along canal buffer zones, capacity upgrades for key roads, and double-decker flyovers.

“Additionally, we will construct a Rs 27,000 crore Peripheral Ring Road and a Rs 40,000 crore underground road network to ease traffic congestion. The budget for Bengaluru’s infrastructure development has been increased from Rs 3,000 crore to Rs 7,000 crore in 2025-26,” the chief minister said in the speech.

However, some of these projects have been facing multiple delays and is likely to take several years to get completed.

The total capital expenditure (Gross) is estimated to increase from Rs 56,492 crore in 2024-25 to Rs 83,200 crore in 2025-26, reflecting a 47.3% rise.

Meanwhile, the state government said that Karnataka has been facing revenue losses from the central government, and despise that it has managed to reduce the revenue deficit from the estimated Rs 27,354 crore in 2024-25 (0.96% of GSDP) to Rs 19,262 crore in 2025-26 (0.63% of GSDP).

“While ensuring funding for the guarantee schemes, we have also increased honorariums for ASHA workers, Anganwadi workers, mid-day meal cooks, guest lecturers, and pre-university lecturers. Managing these expenses while reducing the revenue deficit is a matter of pride, and it reaffirms our commitment to achieving a revenue surplus in the coming years,” Siddaramiah said.

The fiscal deficit for 2025-26 is estimated at 2.95% of GSDP, ensuring that both fiscal deficit and overall liabilities remain within the limits set by the Karnataka Fiscal Responsibility Act.

Over the past two years, Karnataka's budget size has grown considerably, from ₹2,65,720 crore in 2022-23 to Rs 4,09,549 crore in 2025-26—an increase of 54%.

The major sources of Karnataka’s tax revenue include commercial taxes, excise, stamp duty, and motor vehicle taxes, with commercial tax being the highest contributor.