A Janaagraha Centre report reveals that Karnataka ranks last among peer states in per‑capita urban State Finance Commission (SFC) grants for FY 2026‑27, exacerbating infrastructure strain in its cities.

Key Takeaways

  • Karnataka's per‑capita urban grant stands at ₹2,244, far below Kerala's ₹6,251.
  • Tamil Nadu and Odisha have more than doubled their grants since 2018‑19, while Karnataka grew only 25%.
  • Urban local bodies now rely heavily on XVI Finance Commission grants, but delayed elections threaten democratic accountability.

The Janaagraha Centre for Citizenship and Democracy’s report titled “A Story of Reversal of Karnataka’s Fiscal Decentralisation” finds that Karnataka has slipped to the bottom of the per‑capita urban grant rankings for the 2026‑27 fiscal year. Compared with peer states, Karnataka allocates merely ₹2,244 per urban resident, whereas Kerala provides ₹6,251.

Comparative Performance with Peer States

Since the 2018‑19 cycle, Tamil Nadu and Odisha have increased their per‑capita urban SFC grants by 203% and 214% respectively. Karnataka, by contrast, recorded a modest 25% rise and saw zero growth over the last three years. This disparity is striking given that urban residents already constitute 46% of Karnataka’s total population—a share projected to rise to 51% by 2036.

Historical Shift in Fiscal Decentralisation

Historically, Karnataka was hailed as a pioneer in devolving funds and powers to local bodies. The 5th State Finance Commission (SFC), submitted in November 2025, recommended devolving 60% of state revenues to local governments, with 25% earmarked for urban areas. The state government, however, accepted only a 50% devolution, allocating merely 30% to urban bodies, translating to ₹4,972 crore reaching city administrations.

Urban Service Strain and Democratic Deficit

The shortfall in urban funding has left Karnataka’s cities grappling with deteriorating roads, waste accumulation, and inadequate drainage and water supply. Moreover, 13 of the 18 city corporations—including all five under the Greater Bengaluru Authority—operate without elected councils, underscoring a growing democratic vacuum at the municipal level.

Expert Opinions and Way Forward

Senior Advisor Santosh Nargund of Janaagraha warned, “Once a benchmark for decentralised governance, Karnataka is slipping. If the Chief Minister’s vision of ‘more Bengalurus beyond Bengaluru’ is to materialise, meaningful fiscal and democratic decentralisation must be restored urgently.” Senior Manager Manisha Marulasiddappa added that Karnataka’s failure to table Action‑Taken Reports on SFC recommendations in the assembly has eroded accountability, urging the state to normalise such disclosures.