Chief Minister Siddaramiah is arriving in Bengaluru on Friday to present the Karnataka State Budget 2026-27.
Not only has Karnataka’s net borrowing been rising year-on-year, one of the biggest criticisms of the Siddaramaiah-led budgets this term from the opposition BJP, but debt servicing appears to have risen to alarming levels, data shows.
While borrowings increased from ₹1,16,000 in 2025-26 to ₹1,32,000 in 2026-27, registering a growth of 13.8%, repayments increased from ₹26,474 last year, 33% per annum, an increase of ₹35%,31 almost 2.5 times faster than debt growth. “This underscores the importance of maintaining a balanced debt maturity structure to avoid refinancing risks,” the Medium Term Fiscal Plan (MTFP) said.
Why the anomaly
This anomaly is mainly due to the fact that the maturity distribution of market loans shows a concentration in the short- to medium-term segments. MTFP data shows 32.7% of debt in the 0-5 year category and another 37.4% in the 5-10 year category, although 24.6% is in the 10 to 15 year category and only 5.3% in the over 15 year category. “To mitigate these risks, the loan strategy seeks to avoid the accumulation of repayments by spreading the issues over different maturities,” MTFP says.
Further, to avoid year-on-year debt service accrual, the state has now decided to keep the repayment cap in a particular year at 1% of its projected GDP in that particular year to reduce the risk of rollover and balance the repayment profile, MTFP says.
“Continued growth in interest payments points to rising debt service costs and reinforces the need for careful and efficient deployment of borrowed funds into productive capital assets that generate long-term economic returns,” MTFP says.
For committed expenses
The fact that the state presents budgets with a revenue deficit for the fourth year, however, indicates that the debt is also used to cover part of the obligation expenses.
Published – 07 March 2026 20:42 IST
