Bengaluru: Karnataka Chief Minister Siddaramaiah presented a second consecutive revenue deficit budget Friday for the 2024-2025 fiscal, a reflection of the Congress government’s shrinking ability to build capital assets as it diverts funds to meet the ‘guarantees’ and other welfare programmes.
Capital expenditure — money spent to create assets to boost economic growth — is Rs 52,902.96 crore, or just over 14 percent of the total expenditure of Rs 3,71,383 crore. In comparison, capital expenditure accounted for over 16 percent or Rs 51,231 crore RE (revised estimates) of the total expenditure (RE) of Rs 3,17,836 crore in the previous fiscal, according to the overview of the budget.
Year-on-year, this translates to over 3 percent decline in the state’s ability to create assets.
Siddaramaiah allocated Rs 52,000 crore to fund the Congress’s five guarantees or 43 percent of the total allocation for welfare schemes, totalling Rs 1,20,373 crore to mitigate ‘price rise, unemployment and huge income disparities’.
The revenue deficit is estimated to be Rs 27,354 crore and fiscal deficit is Rs 82,981 crore.
It is also the first time since 2020-21 that Karnataka is likely to have a growth rate lower than the national average according to the Mid Term Fiscal Plan (MTFP), adding to the worrying signs in one of India’s most industrious states. The MTFP states that Karnataka will see a growth of 6.6 percent Gross State Domestic Product (GSDP) growth in 2023-24 (Advanced Estimates) as against India’s 7.3 percent.
“While such welfare schemes tend to increase the Revenue deficit, such welfare expenditure is necessary to ensure that fruits of development reach the poorest of the poor,” Siddaramaiah said, presenting the Karnataka budget in the lower house of the state legislature.
The Congress party remains committed to funding its guarantee schemes in the hope that it can continue momentum gained in the May 2023 assembly election and reap political dividends in the Lok Sabha polls.
The Karnataka budget had a copy of the Preamble of the Constitution on its cover page as well.
Siddaramaiah said that the five guarantee schemes — Gruha Lakshmi, Gruha Jyothi, Yuva Nidhi, Anna Bhagya and Shakthi — will enable the government to “put Rs 52,000 crore in the hands of the people during 2024-25”.
“An average of Rs 50,000 to Rs 55,000 is transferred to each family every year through Guarantee schemes,” he added.
The guarantees worked in favour of the Congress in Karnataka, but did not wield the same level of influence in other states like Rajasthan and Madhya Pradesh.
The Congress party is hoping to revive the fortunes of its national unit and has taken a strong stand against the Bharatiya Janata Party (BJP) whose decisions since 2014 it has called “anti-people” and against the interests of Karnataka
Siddaramaiah is attempting to champion the cause of the ‘step-motherly’ treatment by the Centre through reduction of the state’s share from the devolution pool and redistributing it to northern or ‘Hindi-speaking’ states.
He said that the Centre’s anti-people decisions has led to alarming developments such as “widening inequality, concentration of wealth in few hands and crony capitalism” .
Larger gambit
Siddaramaiah used his speech to attack the Union government, alleging that it caused a loss of Rs 59,274 crore due to the “unscientific implementation” of GST in the last seven years. He added that under the devolution pool, the state had lost Rs 62,098 crore in a six-year period.
Addressing the media later in the day, Siddaramaiah said that the Union government was trying to “kill the goose that lays golden eggs” and if Karnataka received its fair share of devolution and other taxes, the state would be like any other “European country”.
The BJP members stormed into the Well of the House in protest, accusing Siddaramaiah of using the assembly as a platform to target the central government.
Former chief minister Basavaraj Bommai said that Siddaramaiah had tainted the culture of presenting budgets by using the forum to target the Centre. “Siddaramaiah, just to cover up his failures, is trying to bring out subjects which are not in the budget and trying to blame (the) Centre unnecessarily. Whatever is expected from the GoI…devolution of funds…it has come. If at all there is a shortage, it is a shortage of (collection) state’s own taxes efforts,” he said.
The senior BJP leader said that Siddaramaiah had borrowed Rs 1.05 lakh crore and only Rs 1,000 crore (compared to last year) was the additional set aside for development.
According to the budget, there is a shortfall of around Rs 15,000 crore of state-level collection of taxes in transport, excise, stamps and registration among others. Even though the ongoing fiscal will end only by 31 March, government officials believe that some of the tax collection targets set last year was “ambitious” and that this has now been made more “realistic”.
The government has decided to downward revise taxes on the premium category of IMFL (Indian Made Foreign Liquor) to make it more competitive with neighbouring states. This, however, is likely to result in a marginal increase in prices at the lower end of the slab, according to the finance department.
The government has reasoned that the premium category of IMFL accounted for about 2-3 percent of the total liquor market and by making it cheaper, this would boost higher sales. It has set a target of Rs 38,525 crore from excise this year.
Meanwhile, gross borrowings stood at Rs 1,05,246 crore, taking the total liabilities to
Rs 6,65,095 crore with no clear roadmap for financial recovery.
Though Siddaramaiah remains confident that the budget and fiscal situation will return to normalcy by next year, there is little clarity on how the government proposes to do this.
Political analyst and economist Prof. Narendra Pani said that Siddaramaiah has “incorporated the guarantees as a budgetary strategy”. He added that the CM is creating an environment to help the inflows for private capital and not from within the state coffers.
“The consistent logic right through the (budget) speech can be broadly tracked back to the dependence on private capital. It is a risk that if private investment does not come in but on the other hand if private investment is coming in, there is no reason for the state to provide the capital,” Pani, a faculty member at the National Institute of Advanced Studies (NIAS), told ThePrint.
After relying massively on guarantees last year to storm to power in May, Siddaramaiah was under pressure from his ministers and legislators to announce other welfare schemes for other sections of the society, people aware of the developments say.
(Edited by Tony Rai)
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