Karnataka CM Siddaramaiah refers to Mahabharata, proposes ‘11G economic model, gold-standard excise duty’ in his 17th budget speech

“We are formulating a unique Karnataka model of development, strong and sustainable development. These are described as the ‘11G Economic Model’,” he said. The 11Gs are Guarantee Economy, Good Public Education, Good Health to All, Grassroots Economy, Good Governance, Gig Economy, Geographical Equality, Global Trade Economy, Globe-Trotting Economy, Green Economy, and Growing Urban Economy.

Despite non-cooperation from the Union Government, Karnataka has maintained fiscal discipline while achieving economic growth, Siddaramaiah said. “Though we have been striving for the development of our state beyond our capacity, the Union Government continues to treat our state unfairly by disregarding the constitutional principles of cooperative federalism. Reduced Central share in Centrally Sponsored Schemes, discriminatory allocation in Central Sector schemes, injustice due to the Fifteenth Finance Commission’s revenue-sharing formula, non-implementation of special grants recommended by the same Commission, and the untimely rationalisation of GST rates have all led to additional burden and pressure on the state exchequer,” he said.

Prior to rationalisation in September last year, the state’s average monthly GST revenue collections were registering a growth of about 10 per cent. However, following the implementation of rate rationalisation, the average monthly growth has moderated sharply to around 4 per cent. “The proposed rate restructuring has resulted in a reduction in overall GST collections by approximately Rs 10,000 crore for the current financial year and Rs 15,000 crore for next year,” according to Siddaramaiah.

Apart from GST rationalisation, the increased burden on the state government due to the enactment of the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-GRAMG) was also discussed in the budget.

Excise duty

Siddaramaiah said that the Resource Mobilisation Committee (RMC) constituted by the government would soon submit its draft report outlining the principles for a modern excise taxation and alcohol regulatory framework. The proposed reforms aim to strengthen transparency, modernise the excise-related regulatory framework, and promote ease of doing business in the excise sector across the state as per current requirements.

Among the reforms will be the Alcohol-in-Beverage (AIB) based excise duty structure, “globally recognised as the gold standard for alcohol taxation, as it directly targets the alcohol content, which is the primary source of negative externalities. This will be introduced from April 2026,” he said.

While all liquors will have fixed Excise Duty, Additional Excise Duty will be levied depending on the cost of the bottle of alcohol. The government, according to the CM, would ensure that the price changes are ‘gradual and not disruptive’.

The system of levying uniform excise duty based on the alcohol content per litre will be another new introduction, which will be implemented in stages over the next three to four years. “Under the new policy, government-administered price fixation will be completely deregulated. Product placement within slabs will be left to the producers based on market considerations,” he said.

Pricing slabs will be rationalised and reduced to eight from the existing 16 slabs.

Budget size

For the 2026-27 fiscal year, the total expenditure is estimated at Rs 4.48 lakh crore. This includes revenue expenditure of Rs 3.38 lakh crore, capital expenditure of Rs 74,682 crore, and loan repayment of Rs 35,316 crore. Compared to the Rs 4.09 lakh crore budget for 2025-26 fiscal, the budget size for 2026-27 has increased by 9.5 per cent.

The total receipts, meanwhile, will be 4.47 lakh crore, of which Rs 1.32 lakh crore will be in the form of borrowings. Karnataka’s own tax revenue for the upcoming fiscal is projected at Rs 2.2 lakh crore, non-tax revenue at Rs 16,000 crore and central government allocations at Rs 79,050 crore.

The fiscal deficit is estimated at Rs 97,449 crore (2.95 per cent of GSDP), while the total liabilities are at Rs 8.24 lakh crore (24.95 per cent of GSDP). “Both the fiscal deficit and total liabilities are within the limits prescribed under the Karnataka Fiscal Responsibility Act,” CM Siddaramaiah said.