Belagavi (Karnataka), Dec 17 (PTI) The Karnataka government on Wednesday said that the five guarantees and other welfare schemes and GST rate rationalisation have constrained its fiscal position.

The state's economy is expected to remain on a growth trajectory this fiscal, supported by adequate rainfall, the government said in its report titled 'Mid-Year Review of State Finances', presented in the Assembly.

The five guarantee schemes are ‘Gruha Jyothi’ offering 200 units of electricity free to every household, ‘Gruha Lakshmi’ scheme promising Rs 2,000 to every woman head of a family and ‘Anna Bhagya’ offering 10 kg rice to every member of the BPL family a month.

The 'Yuva Nidhi’ promises Rs 3,000 dole to unemployed graduates and Rs 1,500 to unemployed diploma holders for two years (in the 18-25 age-group) and ‘Shakti’ scheme permits free travel for Karnataka women to travel within the state in government run non-luxury buses.

"The increase in committed expenditure, including the state's spending on guarantees and various welfare schemes has increased the revenue expenditure," the report said.

"Simultaneously, the shortfall in revenue receipts on account of GST rate rationalisation has further constrained the state's fiscal position. These factors have collectively increased the revenue deficit during the current financial year," it underlined.

To mitigate these challenges, the state said it has undertaken concerted efforts to mobilise its own tax revenues to increase the revenue collections.

"Additionally, expenditure rationalisation initiatives are being pursued to contain non-essential spending and protect allocations for priority development sectors, to narrow the revenue deficit in the remaining part of the year," the government said.

The report said the state's economy is expected to remain on a growth trajectory this fiscal, supported by adequate rainfall.

The government projected the Gross State Domestic Product (GSDP) at Rs 30,91,111 crore for 2025-26, citing the Ministry of Finance.

"State economy is expected to continue its growth trajectory in 2025-26, with adequate rainfall likely to further boost agricultural output, while strong performance in the services and industrial sectors sustains economic momentum," the report said.

The government said inflation remained under control during the first half of the fiscal year, aided by a good monsoon that helped keep food prices low.

Karnataka's fiscal performance in the first half of 2025-26 was strong, with revenue collections recording a year-on-year growth of 7.7 per cent, the report said.

"The state continues to demonstrate robust tax administration and economic activity, ranking second in the country in gross GST collections during the first half of 2025-26," it added.

In terms of expenditure, total spending in the first half reached 36.4 per cent of the budget estimates. Expenditure on capital projects increased by 32.3 per cent compared with the same period in 2024-25, the report said.

The fiscal deficit for the state, which has a budget of Rs 4,09,549 crore for 2025-26, is estimated at 2.95 per cent of the GSDP. PTI GMS KH

State finances strained by welfare guarantees and GST shortfall; measures to raise tax revenue and trim spending. Five welfare guarantees and GST rate rationalisation have increased committed revenue expenditure and reduced revenue receipts, widening the revenue deficit. The government plans to mobilise own-tax revenues and undertake expenditure rationalisation to protect priority allocations and narrow the deficit. Mid-year figures show 7.7% revenue collection growth, 32.3% rise in capital spending, first-half expenditure at 36.4% of budget estimates, and a projected fiscal deficit of 2.95% of GSDP.