Karnataka Chief Minister Advocates for Increased Central Tax Allocation

Call for Fairer Fiscal Distribution

On Friday, Siddaramaiah, the Chief Minister of Karnataka, urged for a larger share of funds from the central tax pool for the state.

He highlighted a significant disparity in fiscal returns, noting that Karnataka contributes approximately 8.7% to the national GDP while accounting for only 5% of India's population, yet ranks second in Goods and Services Tax collections.

The Chief Minister pointed out that the reduction of Karnataka’s share from 4.7% to 3.6% under the 15th Finance Commission has led to a total loss exceeding Rs 80,000 crore from the fiscal years 2020-’21 to 2025-’26.

Siddaramaiah made this appeal during a discussion with Arvind Panagariya, the Chairman of the 16th Finance Commission, which was established in December 2023 to advise on the distribution of tax revenues between the Union and state governments for the period from 2026-’27 to 2030-’31.

According to Siddaramaiah, Karnataka contributes Rs 4.5 lakh crore in taxes annually but only receives 15 paise back for every Re 1 paid in union taxes. He emphasized that such inequity should not persist in the upcoming Finance Commission.

To create a more equitable distribution formula, Karnataka has suggested minimizing the emphasis on the income-distance criterion and prioritizing a state’s economic contributions, ensuring that high-performing states are rewarded rather than penalized, as stated by the Chief Minister’s office.

Additionally, the Karnataka government has requested Rs 1.15 lakh crore to enhance infrastructure in Bengaluru.

The Congress-led government in Karnataka has been in conflict with the Union government, led by the Bharatiya Janata Party, regarding the allocation of tax funds.