Karnataka — what the CAG audit found

Financial audit · State finances

This is the CAG’s annual report on the finances of the whole State. It analyses the State Government’s own accounts for the year — what came in, what was spent, the deficit, the debt and how closely spending followed the budget. It is not a compliance audit (were the rules followed in a particular department?) or a performance audit (did a scheme meet its goals?); the CAG publishes those as separate reports.

“intends to assess the financial performance of the State during the financial year 2024-25 and to provide the State Legislature with inputs based on audit analysis of financial data” — Karnataka report, p. 10

1. Subsidies and guarantee schemes

   Report p. 21

   Explicit subsidies rose by Rs 17,687 crore in 2024-25, driven largely by five guarantee schemes costing Rs 52,525.60 crore, about 19 per cent of revenue expenditure.

   “The subsidies increased sharply during 2024-25, mainly due to five guarantee schemes of the State totaling ₹52,525.60 crore” — CAG report

2. Revenue deficit

   Report p. 21

   The audit states that the five guarantee schemes moved the State from a revenue surplus to a revenue deficit in 2023-24 and 2024-25, with the deficit financed by borrowing.

   “shifted the State from a Revenue Surplus to Revenue Deficit in 2023-24 and 2024-25” — CAG report

3. Debt level

   Report p. 21

   Outstanding public liabilities reached Rs 6,92,115 crore, 23.73 per cent of GSDP, below the national average of 27.63 per cent but with greater reliance on borrowing.

   “The outstanding Public Liabilities of the State reached ₹6,92,115 crore, which stood at 23.73 per cent of GSDP” — CAG report

4. Debt sustainability

   Report p. 79

   Given the primary balance and rising debt burden in 2023-24 and 2024-25, the report says it is too early to conclude that the State's debt has reached a sustainable level.

   “too early to opine that debt burden of the State has reached a sustainable level” — CAG report

5. Fiscal deficit target

   Report p. 74

   The State kept its fiscal deficit within the FRBM target partly by writing back Rs 5,000 crore of unspent panchayat fund balances and refunding Rs 1,333 crore from the SNA account.

   “In 2024-25, the State attained Fiscal Deficit target by writing back the unspent balance of ₹5,000 crore” — CAG report

   State Government’s reply, as recorded: Accepted the facts at the exit conference in January 2026.

6. Off-budget borrowings

   Report p. 116

   Outstanding off-budget borrowings through State entities stood at Rs 14,154.91 crore on 31 March 2025, including Rs 5,437.78 crore borrowed in 2024-25.

   “the outstanding off budget borrowing as on 31 March 2025 was ₹14,154.91 crore” — CAG report

7. Guarantees

   Report p. 79

   Outstanding guarantees were Rs 45,889 crore at end-March 2025, rising each year over the decade but within the limit prescribed under the KFRA.

   “it was well within the limits prescribed in the KFRA” — CAG report

8. Pending utilisation certificates

   Report p. 120

   After clearing 257 certificates, 142 utilisation certificates worth Rs 239.45 crore remained outstanding on 31 March 2025.

   “leaving 142 outstanding UCs amounting to ₹239.45 crore as on 31 March 2025” — CAG report

   State Government’s reply, as recorded: Departments will be addressed to hold responsible persons accountable and initiate strict action.

9. Excess expenditure over grants

   Report p. 94

   Expenditure exceeded the legislature's authorisation by Rs 4,388.75 crore under three grants in 2024-25, mainly Energy, and requires regularisation.

   “There was an excess disbursement of ₹4,388.75 crore over the authorisation made by the State Legislature under three grants during 2024-25” — CAG report

10. Expenditure ahead of legislative approval

    Report p. 93

    Rs 10,035.13 crore across 21 grants was released through 118 executive orders in 2024-25 before legislative approval.

    “was released through 118 executive orders” — CAG report

    State Government’s reply, as recorded: Central share had to be moved to the SNA account within 21 days; PAC had allowed such releases within limits, later approved by the Legislature.

11. Unspent provision

    Report p. 112

    Unspent provision was Rs 22,475.52 crore under 28 grants, up from Rs 19,262.62 crore the previous year and around five per cent of total provision.

    “the unspent provision of ₹22,475.52 crore under 28 grants/ appropriations increased over the previous year” — CAG report

12. Misclassification of expenditure

    Report p. 101

    Rs 2,020.87 crore of revenue expenditure was booked as capital expenditure, understating revenue expenditure and the revenue deficit.

    “there was a misclassification of ₹2,020.87 crore, which resulted in understatement of Revenue Expenditure to that extent” — CAG report

    State Government’s reply, as recorded: Departments would be instructed, and treasuries asked not to accept revenue expenditure under capital heads and vice-versa.

13. Committed expenditure

    Report p. 52

    Committed expenditure (salaries, pensions, interest) rose from 26.57 per cent of revenue expenditure in 2015-16 to 41.75 per cent in 2024-25.

    “Committed Expenditure as a percentage of Revenue Expenditure rose from 26.57 per cent in 2015-16 to 41.75 per cent in 2024-25” — CAG report

14. Capital spending and incomplete works

    Report p. 21

    Capital expenditure was Rs 57,906 crore; the report notes 1,903 irrigation works remained incomplete despite significant funding.

    “many of works continued to remain incomplete (1,903 works)” — CAG report