Bengaluru: Karnataka has disputed the liability projections attributed to the Reserve Bank of India (RBI) and written to the Accountant General (AG) seeking reclassification of certain entries, ahead of the State Budget to be presented on Friday.
Chief Minister Siddaramaiah is scheduled to table the 2025–26 Budget on March 6.
The government has contested the assessment that Karnataka’s total liabilities will touch ₹8.14 lakh crore in 2025–26. According to the State’s 2025–26 Budget Estimates, total liabilities are projected at ₹7,64,655 crore by end-March 2026, translating into 24.91% of Gross State Domestic Product (GSDP).
In contrast, the RBI’s reported estimate pegs liabilities at ₹8.14 lakh crore — or 26.5% of GSDP — by the end of the fiscal.
In an official statement, the State government said the higher figure includes accounting entries that do not represent Karnataka’s actual debt obligations.
The government has identified three components, aggregating to about ₹60,500 crore, which it claims have been incorrectly reflected as liabilities.
First, the RBI report is understood to have included ₹20,412 crore of loans raised by the Union Government for GST compensation under the State’s liability head. The State clarified that these borrowings are backed by the Union Government and serviced through the GST compensation cess collected by the Centre, with no repayment burden on the State’s own revenues.
Second, the government pointed to ₹23,810 crore of earmarked cess funds. These are credited into dedicated funds and deployed for capital investments in infrastructure projects. According to the statement, the balances have been shown both as public account fund balances and separately as “investment in earmarked funds”, resulting in double counting.
Third, ₹16,300 crore invested in the Consolidated Sinking Fund and the Guarantee Redemption Fund maintained with the RBI has also been treated as a liability. The State maintained that these are precautionary investments made in line with RBI recommendations to secure future repayments and cannot be classified as debt.
If the State’s position is accepted, total liabilities would remain at ₹7,64,655 crore, or 24.91% of GSDP — significantly lower than the 26.5% ratio cited in the external assessment.
The government is hopeful of an early resolution following representations made to the AG, the statement added.
