Karnataka’s Chief Minister today firmly states the central government is unfair in sharing money, giving less to the state. He highlights that Karnataka has a very strong economy and makes a lot of its own money, yet it receives less help from the central pot. This accusation comes amidst growing debates about how funds are given to states from the national government, with the Chief Minister arguing that Karnataka’s significant contributions to the nation’s wealth are not being matched by what it gets back, thus impacting essential state projects and people’s needs.
Chief Minister Expresses Concern Over Fund Allocation
The Chief Minister of Karnataka recently made strong statements, saying the central government is not giving the state its fair share of money. He said that Karnataka, which helps the country’s economy a lot, is being treated unfairly when it comes to sharing tax money and grants. The Chief Minister pointed out that the central budget has grown significantly over the past years. Karnataka’s share has not increased in the same way. He stated that out of a large sum of money meant for all states, Karnataka received a very small portion. For instance, he mentioned that from a total of 1,73,030 crore rupees allocated to states, Karnataka was given only 6,310 crore rupees. The Chief Minister also asked why the money earned by hardworking people in Karnataka is being used to support states that might not have managed their finances well. He raised questions about a special grant of 5,495 crore rupees that was recommended by the Finance Commission but was not given by the central government, leading to further financial loss for Karnataka. He also highlighted that despite Karnataka contributing about 4. 5 lakh crore rupees to the national treasury each year, it gets back only around 45,000 crore rupees in tax share and 15,000 crore rupees in grants, which is about 13 paise for every rupee contributed.
“The central government’s unfair treatment of Karnataka continues in full swing. Of the ₹1,73,030 crore allocated to states, Karnataka has been given a mere ₹6,310 crore — a shocking drop from previous installments. This injustice mocks every hardworking Kannadiga,” the Chief Minister said.
The Chief Minister also noted that despite making up only 5 percent of India’s population, Karnataka adds 8. 4 percent to the nation’s total economic output. He also said that Karnataka ranks very high in collecting Goods and Services Tax (GST) and is a leader in GST growth. These statements bring to light the ongoing discussions about how money is shared between the central government and the different states in India.
How Funds Are Given to States
Understanding how money moves from the central government to the states is vital. India uses a system where the Finance Commission, a body set up every five years, suggests how central taxes should be shared with the states. This is called tax devolution. The money given to states this way can be used as they see fit. Besides this, the central government also provides grants to states for specific purposes, like disaster relief or for local bodies. The Constitution of India sets the rules for how tax money is shared. Article 270 explains how net tax money collected by the central government is distributed between the central government and the states. The taxes that are shared include company tax, personal income tax, Central GST. the central government’s share of Integrated GST. A key point of discussion is that certain taxes, like cess and surcharge, collected by the central government are not part of this shared money pool. This means that even if the central government collects more money through these, the states do not get a share. This has been a concern for states because these unshared taxes make up a notable portion of the central government’s total tax income. The 15th Finance Commission recommended that states should get 41% of the shared tax money. Some states, especially those from the southern part of India, have said they are getting a smaller share compared to how much they contribute to the national tax collection. This is partly because the system of giving money uses factors like population and area, which might give less to states that have controlled their population growth or are more developed.
Karnataka’s Strong Economic Growth
Despite the complaints about central fund allocation, Karnataka’s Chief Minister has also spoken about the state’s strong economic health. He said that Karnataka’s Gross State Domestic Product (GSDP) grew by 10. 2% in the financial year 2023-24. This growth rate is much higher than the national average, which was 8. 2% for the same period. This strong growth happened even though the state faced big problems like the worst drought in ten years and a slowdown in global technology markets. The state government has said that its careful planning and varied ways of earning money have helped keep its economy strong. Karnataka’s GSDP per person is among the highest in India, showing the good effects of the state government’s programs that aim to help everyone. Figures show that Karnataka’s GSDP grew by 13. 11% each year on average between 2011-12 and 2017-18. The state’s share of the national GDP has also increased greatly over the past five decades, more than any other state. From 5. 4% in 1960-61, Karnataka’s share grew to 8. 2% by 2023-24. This puts Karnataka among the top states contributing to India’s economy.
“Karnataka’s GSDP growth rate of 10. 2% in FY 2023-24 outperformed the national average of 8. 2%, amid challenges like drought and global IT slowdown.”
The state is a leader in the insights technology (IT) sector and keeps bringing in investments, making it a big part of India’s digital and economic landscape. Even with a slowdown in the Indian IT industry generally, Karnataka has managed to keep its economy going strong. The state has also seen good growth in GST collections and stamp duty revenue, showing a healthy path for its economy.
The Central Government’s Perspective
The central government often highlights the role of the Finance Commission in deciding how funds are shared. The Finance Commission looks at various factors, including population, area, income gap. tax effort, to decide how much money each state should get. This system aims to reduce differences between richer and poorer states and ensure money reaches where it is needed most for basic services. But, states often face challenges in managing their budgets. They rely a lot on money transferred from the central government, which makes up a big part of their income. There can be big differences between the money states expect to get from the Centre and what they actually receive, especially for programs that are supported by the Centre but run by the states. This makes financial planning difficult for states. The central government has also provided loans without interest to states for big projects in health, education. infrastructure to help boost state spending and economic growth. While the system is designed to share resources fairly, sometimes the central government and state governments, especially those run by different political parties, may have different ideas about money matters. The central government has sometimes said that complaints about less tax revenue reflect the state government’s own problems in meeting promises.
Expert Views on State Finances
Financial experts note that managing money between the central government and states in a diverse country like India is a complex task. They point out that while states have some power over earning and spending money, support from the central government is still very vital. One issue experts often talk about is the part of central government taxes like cess and surcharge that are not shared with states. This can affect how much money states have for their own programs. Experts suggest that the central government should ensure that money transfers are timely and predictable, especially those recommended by the Finance Commission. Experts also say that states need to improve their own ways of collecting money, like better GST compliance and using digital tools for tracking revenue. They also suggest states should fix problems like money leaks in property tax collection. Strengthening the financial health of states is key for the overall development of the country. This needs good cooperation between the central and state governments. Some reports show that states have improved their own revenue collection. the total money they get is still less than before, partly because central transfers have decreased, like when GST compensation grants ended. This situation means states have to borrow more to cover their spending, leading to an increase in their total debt.
Potential Impact and Future Steps
The disagreements over fund sharing between Karnataka and the central government highlight ongoing discussions about the country’s financial system. Such accusations can sometimes lead to tension between state and central leaders. The Chief Minister has asked for a public discussion on how Karnataka can get its rightful share while respecting the national structure. These discussions are not new and often come up when Finance Commissions review how money should be shared. The current 16th Finance Commission has been formed and will give its suggestions for the period from 2026-31. Its recommendations will be very essential for how funds are shared in the future. The state government will likely continue to push for more funds, stating its strong economic contribution to the nation. The central government, on its part, will likely stick to the rules set by the Finance Commission, which aims for a balanced distribution across all states, considering various needs and development levels. The ongoing dialogue will shape future policies on financial relations between the Centre and the states, impacting development projects and welfare programs across the country. 
