BENGALURU: Chief Minister Siddaramaiah has managed to keep the macro fiscal parameters within the specified limits of the Karnataka Fiscal Responsibility Act while he appears to be depended more on tax buoyancy for resource mobilisation, like in his previous budgets.
“Depending too much on the buoyancy without making efforts to mobilise resources from other sources could be risky if the economy fails to do well. In the past, Siddaramaiah has been lucky to reach his targets. If the economy is bad, then the state will be forced to borrow more,” Prof Abdul Aziz, National Fellow at the National Law School University, Bengaluru, said.
The CM, in the Budget, has projected revenue surplus of `911 crore with an estimated fiscal deficit of `20,200 crore which is 2.75 per cent of the Gross State Domestic Project which is within the prescribed 3 per cent. Similarly the liabilities-around `1.81 lakh crore-is at 24.56 per cent of the GSDP which is which is within the 25 per cent prescribed in the fiscal responsibility act.
Making a commitment to continue all Central Sponsored Schemes (CSS) despite a cut in funding from the Centre, Siddaramaiah has almost utilised the additional devolution of funds as per the 14th Finance Commission.
To make up the estimated net loss of `1,987 crore due to cut in CSS funds and new methodology adopted to calculated the GSDP, the CM appears to be depending on taxing tipplers and smokers by increasing VAT from 6 per cent to 20 per cent. Besides, he has also increased 1 per cent tax on fuel and marginal increase in certain taxes for the stamps and registration.
“The mobilisation of resources from these hikes is almost negligible compared to the size of the Budget,” Aziz said foreseeing an increase in borrowings.
Micro Management Flawed: In the Budget, Siddaramaiah has projected the estimated borrowings at `22,950 crore showing a capital investment of `20,564 crore. The remaining `2,386 crore from the borrowings is not clearly shown indicating that the funds have been used for consumption of other needs that could have an adverse effect on the state economy in the long run.
“The micro management of the fiscal discipline is a cause of worry,” I S Prasad, Chairman of the Central Taxation Committee at the FKCCI said.
He said that the Budget lacked vision and is almost resembles the previous Budget. “At the macro level, the Budget is balanced with no revenue deficit. The CM seems to have not taken into account the possible seventh pay commission that the state might have to pay,” he said.
On the industrial front, the Economic Survey 2014-15 released on Friday pointed an almost 2 per cent decline in credit-deposit ratio indicating that no investments are coming through. “We need to take into account the aggressive attitude of neighbouring CM Chandrababu Naidu to arrest industries going out of the state,” he said.