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Karnataka Flags Wider Revenue Gap as Telangana’s Deficits Deepen in Mid-Year Reviews

Mid-year reports attribute revenue shortfalls to GST changes alongside welfare commitments, prompting spending recalibration.

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 (ANI)
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Overview

  • Karnataka’s mid-year review says the budgeted revenue deficit of ₹19,262 crore is likely to widen due to GST rate rationalisation (₹9,000 crore hit) and the non-merger of cess (~₹9,500 crore).
  • Expected mining tax receipts remain delayed as the Karnataka Mineral Rights and Mineral Bearing Lands Tax Bill awaits Presidential assent, with the state moving to rationalise non-essential spending.
  • Karnataka maintains a growth outlook with a projected GSDP of ₹30.91 lakh crore for 2025-26, H1 revenue growth of 7.7%, and a fiscal deficit estimate of 2.95% of GSDP.
  • The state highlights strong capital inflows, recording $6.6 billion FDI in 2024-25 and $5.6 billion in the first quarter of FY26.
  • Telangana’s CAG snapshot to November shows a revenue deficit of ₹9,372.94 crore and a fiscal deficit of ₹58,068.89 crore, driven by heavy borrowings that have already exceeded the annual target and by interest and pension payouts nearing full-year provisions.