BENGALURU: As Karnataka Chief Minister Siddaramaiah presents his 16th budget on March 7, the challenge would be to strike a balance between development and social welfare schemes. The increase in borrowing will be inevitable in order to fund the five guarantees on one hand, and ensure infrastructure development, which is key to growth.
In the previous budget, Gross State Domestic Product (GSDP) was projected to be Rs 28,09,063 crore, and borrowing was proposed at Rs 1,05,246 crore, a 23 per cent hike compared to FY 2023-24 (Rs 83,818 crore).
This time, with the GSDP projected to be Rs 32,00,000 crore, borrowing would surpass Rs 1.5 lakh crore. The state’s outstanding liabilities are estimated to be 24 per cent of the GSDP at the end of 2024-25, which means debt stood at Rs 6.65 lakh crore. The state can borrow up to 25 per cent of its GSDP as per the Karnataka Fiscal Responsibility Act.
The size of the 2025-26 budget would cross Rs 4 lakh crore from Rs 3.71 lakh crore in 2024-25. Allocation for the five guarantees may exceed Rs 52,000 crore (2024-25) as there would be a rise in the number of beneficiaries. Finance department sources asserted that there will be no decrease in allocation for the guarantees but in order to give an impetus to development, the CM is planning to hike capital expenditure which was Rs 55,877 crore.
A hike in allocation for infrastructure is likely to boost industrial growth, with the recently held Invest Karnataka 2025 - Global Investors’ Meet promising to attract Rs 10.27 lakh crore investment, and creating an estimated 6 lakh jobs. More incentives for industries, including green energy sector, is likely. With the guarantees reportedly ensuring a minimum basic income of Rs 10,000 every month per family, the government can boast of ensuring social equity and economic liberty.
Deficit budget again
CM Siddaramaiah presented a Rs 27,354-crore revenue deficit budget for 2024-25, and it would be repeated, as advised by finance officials. The officials were also of the opinion that the state needed two or three financial years to return to surplus budget mode, sustaining the burden of the guarantees.
By the virtue of it, the state will be eligible for the Revenue Deficit Grants (RDGs) which are subsidies given to states to help fill the gap between revenue and expenditure. Kerala has been getting RDGs following recommendations of the Finance Commission.
Economic corridors did not take off
Siddaramaiah had announced two dedicated economic corridors -- New Mangaluru Port to Bengaluru, and Bidar to Bengaluru -- in the previous budget. But the projects proposed on the lines of Mumbai-Chennai economic corridor to stimulate growth, have not taken off as yet. The feasibility report lies with the PWD, and there is no clarity on expediting the project, according to sources.
This time, the CM has a challenge to ensure regional balance by allocating funds to different regions, especially Kalyana Karnataka. Another big challenge is to ensure SCP/TSP grants meant for the welfare of SC/STs are not diverted to fund the guarantees, as the BJP has been insisting.