Karnataka Budget: Fine balancing act, but debt a worry

Notwithstanding low economic growth this fiscal, Chief Minister Jagadish Shettar has managed to present a balanced Budget besides keeping the macroeconomic parameters within limits prescribed in the Karnataka Fiscal Responsibility Act.

Published: 09th February 2013 09:39 AM  |   Last Updated: 09th February 2013 09:56 AM   |  A+A-

Notwithstanding low economic growth this fiscal, Chief Minister Jagadish Shettar has managed to present a balanced Budget besides keeping the macroeconomic parameters within limits prescribed in the Karnataka Fiscal Responsibility Act.

By keeping the overall deficit at Rs 70 lakh, the CM has done well in his maiden Budget to strike a balance between resource mobilisation and expenditure.

The government has also done well on tax mobilisation in the current fiscal by collecting Rs 53,492 crore, a  15 per cent increase.

Hoping that the economy will grow at an estimated 7 per cent of the state’s GSDP, the government has set an ambitious but achievable tax collection target of Rs 61,012 crore, up Rs 7,519 crore compared to the revised estimates of 2012-13.

The big concern, however, remains increasing debt and debt servicing.

The government, though has scaled down borrowings by Rs 6,000 crore due to efficient and effective tax collection.

According to Dr K Gayithri, Associate Professor and Head, Centre for Economic Studies and Policy at the Institute for Social and Economic Change, Karnataka’s macro fiscal policies were always within the prescribed limits.

She, however, feels that the increase in borrowings between 2008-2010 is likely burden the state’s repayment in the coming years.

 “The state should set up a sinking fund and plan its repayment well in advance to avoid any fiscal crisis.”

Dr Abdul Aziz, visiting professor at the National Law School of India University says there is no worry for the state as long as borrowings are used for capital investment.

“One has to worry if the funds raised from the market are used for payment of subsidies or for other non-plan expenditures,” Dr Aziz said, terming Shettar’s Budget a balanced one.

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