The budget presented by Chief Minister Basavaraj Bommai is an exercise between pareto optimality and arrows impossibility. The Pareto optimality is to satisfy all without hurting others, whereas the arrows impossibility refers to various institutional constraints which does not allow the satisfaction of all. Bommai has dutifully followed the excellent method of the Union Finance Minister. Karnataka is expected to record growth at 11% per cent in real terms and 20 per cent in nominal terms this fiscal year.
He stated, “This Budget is a promise for development and a better future. With a sense of fulfilment of implementing the programmes formulated for the bright future of Karnataka in this financial year, I am presenting this Budget with the vision of responsibilities, targets and results for the next 25 years.” Certainly, envisioning the future is quite welcome but the first step to the future is most important, and therefore we must look at this budget as a step towards this year’s programme for growth.
Though this budget is seemingly quite favourable and addresses myriad concerns, there are a few challenges. The first one being management of the state finances and public debt. Many critics have pointed out that the state witnessed a sharp increase in public debt from Rs 1.94 lakh crore in 2018-19 to Rs 4.25 lakh crore in 2022-23. This should have been corrected with strong revenue efforts, but state tax revenues increased only by about Rs 10,000 crore above the revised estimates. The budget expenditure in the upcoming fiscal year is placed at Rs 2.86 lakh crore, a 4.77 per cent increase over the revised estimate of last year. This is expected to provide a GDP growth of 7.9%. Certainly a feasible target, but efforts should be made to boost the MSME sector and trade.
The next challenge is to showcase and maintain fiscal prudence that would require cutting down the expenditure on popular schemes. But that may prove detrimental in this pre-election budget. There is almost Rs 7,000 crore (25 per cent) receivable from Centre’s GST compensation. Several centrally sponsored schemes like MNREGA, National Education Mission, Rashtriya Krishi Vikas Yojana, Ayushman Bharat and National Livelihood Mission will have to be maintained with reduced Union budget allocation.
Finally, the budget seems to have addressed many issues but failed to focus on the immediate growth drivers. The capital expenditure is to be met from the open market borrowing and help from the union government. The spending on capital expenditure increased only by Rs 12,000 crores and it is expected that this will help to meet the demand for funds from all the capital expenditure projects.
Dr Khalil Shaha
Researcher, Institute for Social and Economic
Change Bangalore