Fund crunch, growing debts key points ahead of Budget in Karnataka

Bommai’s predecessor, BS Yediyurappa, had depended on higher borrowing to provide for developmental projects, some of which have been lying idle for a while on account of the fund crunch in Karnataka and the Covid-19 pandemic-induced hardships.

Acute fund crunch and growing debts are key talking points ahead of Karnataka chief minister Basavaraj Bommai’s maiden budget on Friday (March 4), which comes just a year before the state heads for assembly elections next year.

Karnataka chief minister Bommai, people aware of the developments said, has to make big-ticket announcements while trying not to raise prices of essential commodities, especially petrol and diesel. (PTI)

Bommai’s predecessor, BS Yediyurappa, had depended on higher borrowing to provide for developmental projects, some of which have been lying idle for a while on account of the fund crunch in Karnataka and the Covid-19 pandemic-induced hardships.

Bommai, people aware of the developments said, has to make big-ticket announcements while trying not to raise prices of essential commodities, especially petrol and diesel.

According to officials from the state government, Karnataka has seen an overall increase in commercial taxes collections.

“(Commercial tax) collections up to 28-02-22 is ₹88732 Crore. Including Compensation/loan of ₹25267 crore,” said an official, who requested not to be named.

Karnataka’s collections in duty on alcohol stands at ₹23,650 crore till the end of February, against a target of ₹22,700 crore, said another official.

In the GST regime (goods and services tax), state dependency has increased on its taxes, including commercial taxes, excise, motor vehicles tax, stamps & registration

Having increased duty on alcohol twice in 2020, the Yediyurappa-led government had refrained from another increase. However, the sector is likely to witness some changes, people aware of the developments said.

The GSDP (gross state domestic product) also contracted by -2.6% last year, registering the first decline in years. Yediyurappa had presented a revenue deficit budget in 2021-22, the first in many decades, as shortfalls in earnings were pegged at ₹15,133.60 crore.

“We don’t know where he (Bommai) will get his resources from,” said Narendar Pani, economist and faculty at the National Institute of Advanced Studies (NIAS).

“The national economy also is low as third-quarter growth is just 5.4%. So at the end of it all, if the overall growth rate drops to less than 8% then you are not even back to 2019 levels,” Pani said.

Bommai, on February 1 post the Union budget, had said that Karnataka was estimated to get around ₹3500 crore under the capital account compared to the previous year.

On account of the higher borrowings to make up for revenue shortfalls, the total debt of the state was up nearly 32% between 2019-20 when it stood at ₹2.34 lakh crore to ₹3.07 lakh crore by 2020-21, according to a Comptroller and Auditor General (CAG) report in December last year.

During the same period, loans and advances from the centre to the state also saw a sharp rise from ₹13,908 crore to ₹26,617 crore in the same period.

“The indebtedness of the government increased by ₹96,506 crore during the year, which is inclusive of off-budget borrowings of ₹18,421 crore. The ratio of outstanding public debt and other liabilities works out to 23.06% of the GSDP,” according to the CAG report, released in December.

Having faced challenges from within his government ever since he replaced Yediyurappa last July, Bommai has tried hard to fit in, allowing the hard right to run free, which has often been referred to as his incessant need to “please” the Rashtriya Swayamsevak Sangh (RSS), the ideological parent of the ruling Bharatiya Janata Party.

The hardened stand on the Hijab row, the defending of the controversial remarks made by his cabinet colleague KS Eshwarappa, among other issues, have also given a deep hit of communal colour to his entire administration, a Bengaluru-based political analyst, requesting anonymity, said.

“He (Bommai) cannot be efficient if he gives in so much to the RSS. This is something that Yediyurappa mastered that even when you are playing along the communal lines, you ensure that it does not become a matter of day-to-day difficulty,” said the activist.