NEWS – Karnataka to Surpass Budget Growth Projections for FY26: Ind-Ra

HIGHLIGHTS

Projected Economic Growth

• India Ratings & Research (Ind-Ra) expects Karnataka’s nominal GSDP growth for FY26 to be around 11.5%, significantly higher than the 6.5% projected in the state’s budget.
• The revised estimate for FY25 shows 12.8% nominal GSDP growth.
• The average nominal GSDP growth for Karnataka between FY19 and FY24 was 11.6%, supporting the higher projection.

Impact on Fiscal Deficit and Debt

• With actual growth at 11.5%, the fiscal deficit for FY26 is likely to remain aligned with the budget estimate (BE).
• The debt burden could be slightly lower than the FY26 BE projection of 24.9% of GSDP.
• Including state guarantees, combined liabilities stood at:
  • 25.3% of GSDP in FY24 (up from 24.2% in FY23)
  • Expected to reduce to 23.8% in FY25 RE

Revenue and Expenditure Trends

• Revenue receipts in FY26 are budgeted to grow by 13.5%.
• Revenue expenditure is expected to increase by 9.8%.
• The state’s own tax revenue (which accounts for 70% of revenue receipts in FY25 RE) is projected to grow 15.4% in FY26.
• Ind-Ra expects the Rs 2.08 lakh crore tax revenue target for FY26 to be achievable.

Fiscal Performance in FY25

• Revenue deficit in FY25 RE was Rs 26,130 crore (0.9% of GSDP), lower than the budgeted Rs 27,350 crore (1.0% of GSDP).
• This improvement was due to lower-than-budgeted revenue expenditure of Rs 2,83,930 crore in FY25 RE, versus Rs 2,905.3 billion in FY25 BE.
• FY25 nominal GSDP growth was 12.7%, marginally higher than the projected 12.3%, leading to slightly improved deficit ratios.

State Guarantees

• Government guarantees rose 15.4% in FY24, reaching approximately Rs 44,250 crore.
• These guarantees contribute to the state’s overall debt profile.