Paying the Price

Keenly watched for how it would deliver the Congress party’s poll assurances in Karnataka, the incoming government’s maiden budget, presented by Chief Minister Siddaramaiah who holds the Finance portfolio–this is his 14th budget, making him the most experienced finance minister the state has ever had–has generated much debate and criticism. It was never going to be easy to accommodate the five ambitious social guarantees that catapulted the Congress to power in Karnataka–Gruha Jyothi (up to 200 units free electricity for all households), Gruha Lakshmi (Rs 2,000 a month to women heads of families), Anna Bhagya (10 kg rice per month to each BPL ration card holder for free), Yuva Nidhi (Rs 3,000 monthly allowance to unemployed graduates and Rs 1,500 to unemployed diploma holders who passed this academic year for up to 24 months) and Shakti (free travel for women in state-run non-luxury buses across Karnataka). While the outgoing chief minister Basavaraj S Bommai had presented a nominally revenue surplus budget in his interim budget earlier this year, an increase in borrowing was only to be expected to fund the schemes, which are expected to cost Rs 35,410 crore for the rest of this fiscal year. The Karnataka budget for 2023-24 is estimated at Rs 3,27,747 crore, with a revenue deficit of Rs 12,523 crore, which, at 2.6 per cent of the state’s enhanced Gross Domestic Product estimate for 2023-24, is within the norms of the Fiscal Responsibility and Budget Management Act, 2003. The state’s revenues for the current financial year, excluding devolution and grants-in-aid from the central government, have been projected at Rs 1.76 lakh crore, which is 6.7 per cent higher than Rs 1.64 lakh crore estimated by Bommai in his interim budget. Some of this revision is owing to the enhanced targets for the Stamps and Registration Department for the year 2023-24 (at Rs 25,000 crore) and the Excise Department (at Rs 36,000 crore). The revision of guidance values of all immovable properties and the increase in Additional Excise Duty on Indian Made Liquor (IML) and beer by 20 per cent and 5 per cent respectively will help the government generate the additional revenue it needs to fund its plans to ensure universal basic income in the state.

“Through our five guarantees, in a year, approximately Rs. 52,000 crore will be spent and it is expected to reach about 1.30 crore families. This means we will be providing on an average additional financial assistance of Rs 4,000 to Rs 5,000 monthly to each household… This is done with the objective of providing a Universal Basic Income for our citizens. This is the first such initiative in the entire country,” Siddaramaiah said in his budget speech. An allocation of Rs 17,500 crore has been made towards the Gruha Lakshmi scheme, which will give women heads of households who do not fall under the tax bracket a monthly assistance of Rs 2,000 starting in August. Another Rs 2,800 crore has been allocated for the Shakti scheme that has drawn flak from autorickshaw drivers who have seen a dip in their incomes since it kicked in. A Rs 9,000 crore allocation has been made towards Gruha Jyothi for FY23-24 based on last year’s consumption by households. Anna Bhagya, which enjoys an annual allocation of Rs 10,000 crore, has run into a rough patch already with the Food Corporation of India cancelling its order to supply about 2.22 lakh metric tonnes of rice to Karnataka towards the 5kg extra rice promised to 1.19 crore BPL card holding families in the state. The government has said that it will try to procure rice locally, failing which direct cash transfers will be made instead.

A revenue department official told OPEN that while the budget hasn’t made an explicit allocation for Yuva Nidhi, the government plans to set aside Rs 250 crore towards providing 5 lakh graduates unemployment doles for three months this financial year. “The scheme kicks in only if you haven’t found a job within six months of graduation. This year’s batch graduated in June and will become eligible in December,” he said.

Revenues aside, capital expenditure targets have, worryingly, taken a hit. The estimate for FY24 stands at Rs 54,374 crore, 11.2 per cent lower than Bommai’s estimate of Rs 61,234 crore earlier this year, and lower than even the target set for Karnataka–about Rs 57,381 crore–by the Union Finance Ministry as part of its guidelines for capital expenditure support of Rs 1.3 lakh crore for all the states. “It is disappointing that this government has disregarded the Centre’s massive capex push, preferring populist measures instead,” said Samir Kagalkar, head of the Karnataka BJP’s Economic Cell, speaking to OPEN. “The budget smacks of insincerity. Siddaramaiah is known to play with numbers–whether it is promising 10kg rice and later ‘clarifiying’ that he meant it was only 5kg in excess of the 5kg already provided by the Centre, or his spurious claims of allocating Rs 34,000 crore for SC ST welfare.” Kagalkar warned that Siddaramaiah’s “obdurate and stubborn focus on the unsustainable guarantees” would knock the state off the path of progress. “When the BJP government took the reins of the state in 2019, the GSDP was about Rs 13.3 lakh crore. The Bommai government bowed out having added Rs 10 lakh crore to the GSDP. Under the BJP regime, GST collections doubled to Rs 14,593 crore, per capita income rose from Rs 2.24 lakh in 2019 to Rs 3.32 lakh now. We got $22.1 billion in FDI to Karnataka in 2022 alone–more than what the Congress managed in the entire course of its last term,” he added.

Siddaramaiah, on his part, claimed to “take forward the Karnataka Model of governance ‘Sarvarige Samapalu, Sarvarige Samabalu’ (equal share to all, equal opportunities to all)” as he presented the budget on July 7. “The previous government had given approval to huge number of projects in major departments with scant regard to the principles of fiscal discipline,” he alleged in his budget speech. “As on end of 2022-23, a total of Rs. 2,55,102 crore works are pending and it requires nearly six years to complete these projects. The huge balance cost of works left over by the previous Government has posed a major challenge to our Government in taking up new projects,” he added.

The chief minister, who had warned of austerity measures ahead of the budget, has cut allocations to key sectors like agriculture, water resources, rural development, education and health, prompting critics to rue that the social guarantees are being implemented at the cost of development. “Congress has cut the allocation to water resources from Rs 22,839 crore allocated by Bommai to Rs 19,027 crore, a reduction of 17%. Funds allocated to rural development have fallen by 13 per cent from the previous allocation of Rs 19,854 crore. The government has also scrapped the Rs 4,000 extra payout in addition to the PM Kisan Samman Nidhi, introduced by BS Yeddyurappa. The allocation to agriculture and horticulture has fallen by 40 per cent–from Rs 9,370 crore to Rs 5,740 crore. Ignoring the farming sector could well backfire on the government,” says MG Chandrakanth, an agricultural economist. The Siddaramaiah government is expected to introduce a bill repealing the Karnataka Land Reforms (Amendment) Act and introduce an amendment to the Agricultural Produce Marketing (Regulation and Development) (Amendment) Act, 2020. The budget, however, remained silent on these proposals.

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