Finance Department advisory not indication of financial crisis, says Deputy Chief Minister

Karnataka Deputy Chief Minister G. Parameshwara clarified on Thursday that a recent Finance Department advisory on financial management should not be interpreted as evidence of a financial crisis or bankruptcy for the State. He emphasized that the government would continue to adhere to financial discipline. The Deputy Chief Minister responded to criticism from Opposition members regarding the Finance Department's observations on the State's finances.

The advisory aimed to caution against undertaking projects beyond the approved Budget without securing necessary resources. It highlighted that projects costing ₹1,000 crore or more, which lacked budgetary allocation, could strain cash flow and financial management. The advisory also noted that Karnataka's estimated financial deficit for 2026-27 was 2.95%, slightly above the permissible 3% under the Fiscal Responsibility and Budget Management (FRBM) framework.

The State's liabilities, expressed as a percentage of Gross State Domestic Product (GSDP), stood at 24.94%, within the limit of 25%. The Deputy Chief Minister stressed that Karnataka had generally maintained financial discipline, citing former Chief Minister Siddaramaiah's 16 Budget presentations while keeping deficits and liabilities within limits.

He affirmed the State's sound financial position and reiterated the commitment to fiscal discipline. Parameshwara referenced previous Finance Department advisories during previous BJP governments, including one in January 2020 under B.S. Yediyurappa's tenure, warning of financial difficulties if Central tax transfers failed to improve.

He also cited advisories in 2022 and 2023, cautioning against revenue surplus budgets due to rising committed expenditures and limited revenue-generating options. The Deputy Chief Minister emphasized that financial discipline was a collective responsibility, irrespective of the ruling party, and should not be viewed through a partisan lens.