Bengaluru: The Karnataka govt Saturday urged the Centre to address what it described as the state’s “shrinking fiscal space” in the Union budget 2026-27, citing mounting pressure from GST changes, rising social commitments and rapid urbanisation.Revenue minister Krishna Byre Gowda, representing the state govt, handed over a detailed memorandum to Union finance minister Nirmala Sitharaman at the Union Pre-Budget Meeting for 2026-27 in Delhi.
In a statement issued by the chief minister’s office, Gowda said: “Karnataka is a major contributor to national growth, but is facing shrinking fiscal space amid GST changes, rising social commitments, climate shocks, and rapid urbanisation. States’ responsibilities have expanded faster than their revenues, necessitating corrective fiscal measures in Budget 2026-27.”The minister flagged the fiscal and employment impact of replacing the demand-driven Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) with the allocation-based Viksit Bharat Guarantee for Rozgar and Ajivika Mission (Gramin) (VB-G RAM G) scheme. He said the shift had reduced effective employment days and warned that to sustain 13 crore person-days of work, “Karnataka would require approximately Rs 2,000 crore, which is fiscally unsustainable.” He sought reconsideration of the scheme design, restoration of demand-driven employment and adequate uncapped central funding.On GST rationalisation, Gowda said Karnataka’s GST growth had declined from 12% to 5%, leading to a Rs 5,000 crore shortfall this year and Rs 9,000 crore annually. He requested “a robust revenue protection mechanism for states and to ensure full compensation for revenue loss, similar to GST compensation cess.”Calling for a 50:50 sharing of excise duty on tobacco and cess on pan masala, he said it was inequitable that such proceeds remain outside the divisible pool.Gowda also highlighted delays in central releases under the Jal Jeevan Mission, sought additional support for agriculture through a price deficiency payment scheme, enhanced central contributions for frontline workers, and expeditious release of pending Finance Commission grants.Reiterating Karnataka’s commitment to fiscal discipline and national growth, the minister appealed for Budget 2026-27 to restore fiscal balance, predictability and trust between the Centre and states.
