Revenue deficit likely to widen by close of FY26, K’taka assembly told
Karnataka's Mid Year Review reveals a projected revenue deficit of ₹19,262 crore, worsened by weak tax inflows and rising welfare costs, risking a ₹9,000 crore shortfall.
The Mid Year Review of State Finances, which was presented in the legislative assembly on Wednesday, showed that weaker tax inflows and rising welfare costs, among other factors, threatened to push the state’s revenue deficit beyond earlier projections.
The current fiscal year’s budget projected a revenue deficit of ₹19,262 crore, which, according to the report, was now vulnerable in the wake of the recent GST rate rationalisation and non- realisation of taxes of mines. It noted that officials foresaw “a significant reduction” in revenue.
The government expects to miss out on over ₹3,000 crores of tax money from mining and related ventures, said the report, as the Karnataka Mineral Rights and Mineral Bearing Lands Tax Bill is still awaiting Presidential assent.
According to the report, Karnataka is likely to fall short of its revenue targets by about ₹5,000 crore during the year so far, with the gap widening to nearly ₹9,000 crore by the end of the fiscal. This comes on top of an estimated ₹9,500 crore loss arising from the non merger of the cess.
On the spending side, the review highlighted the growing weight of committed obligations. “The increase in committed expenditure, including the state’s spending on guarantees and various welfare schemes, has increased the revenue expenditure,” it said.
The government said it was responding by tightening control over discretionary spending.
While most revenue generating departments recorded growth compared to last year, collections from Stamps and Registration declined. The report attributed this to a slowdown in real estate activity, though it added that revenues could recover in the latter half of the year.