Karnataka Balances Fiscal Strain with Growth Prospects

The Karnataka government is grappling with fiscal constraints due to welfare schemes and GST rate changes but projects economic growth supported by adequate rainfall. The state aims to boost tax revenue and curtail non-essential spending while maintaining a robust fiscal performance.

The Karnataka government announced that fiscal challenges have arisen due to its welfare schemes and GST rate adjustments. Despite these constraints, the state's economy is expected to grow, aided by favorable rainfall, as detailed in the 'Mid-Year Review of State Finances' report presented in the Assembly.

The report highlights five major welfare schemes, including 'Gruha Jyothi', offering free electricity, and 'Gruha Lakshmi', providing financial assistance to women. These initiatives have impacted revenue expenditure, while GST rationalisation has affected revenue receipts, collectively widening the state's revenue deficit.

Efforts to boost tax revenue and strategic expenditure rationalisation are underway to manage the fiscal deficit. The Gross State Domestic Product for 2025-26 is expected to reach Rs 30,91,111 crore, supported by growth in agriculture and industrial sectors, alongside controlled inflation and strong tax administration.