Karnataka Chief Minister Siddaramaiah arrives to present the State Budget in the Assembly, in Bengaluru on July 7, 2023.
Karnataka Chief Minister Siddaramaiah accused the Bharatiya Janata Party (BJP) governments in the State and Centre of fiscal indiscipline, causing slow growth of economy, corruption and maladministration in his budget speech on July 7.
“The State was reeling under darkness and injustice. On the one hand, crony capitalists thrived, while on the other, common people suffered untold miseries. While the deadly pandemic was after our lives, maladministration and corruption cost common people much more,” he said.
Defending the 5 guarantee schemes of the Congress, he said they are necessary to ‘bring the people out of the calamitous cycle of suffering on account of demonetisation, COVID-19 pandemic, political instability, uncontrolled price rise and lack of vision for development’. Claiming that ‘corruption was one of the many significant contributions of the previous government’, he vowed to wipe out the menace.
Comparing the Compound Annual Growth Rate (CAGR) of various sectors of Karnataka’s economy during 2013-18 under the previous Congress regime and during 2019-23 when BJP was governing the State, he said the previous government failed to revive the State’s economy from the COVID-19 induced slowdown. While the industrial sector grew at a CAGR of 8.7% and service sector at a CAGR of 9.69% during 2013-18, the figures were 3.86% during 2019-20 and 4.25% during 2022-23. Foreign Direct Investment (FDI) inflows had dropped from $22 billion in 2021-22 to $10 billion in 2022-23.
Accusing the previous government of fiscal indiscipline, Mr. Siddaramaiah alleged. “The total outstanding liabilities at the end of 2017-18 were ₹2,45,737 crore, which has shot up to ₹5,16,788 crore by the end of 2022-23. The debt repayment liabilities of the State were 9.5% of the revenue receipts in 2017-18, which has increased to 15.06% of the revenue receipts in 2022-23,” he said.
The Chief Minister pointed out that the previous government had failed to contain the committed expenditure and mobilise resources for public welfare programmes. Though the budget size has increased by 50% between 2018-19 and 2023-24, the committed expenditure towards salaries, pensions and interest payments have increased by 81% in these five years.
He claimed that the increasing outstanding loans and losses of electricity companies portrayed ‘the poor administration’ by the previous government.
Gross injustice to Karnataka in tax devolution
Siddaramaiah alleged ‘gross injustice’ to Karnataka in tax devolution, as per the 15th Finance Commission, which recommended only 3.65% of the divisible pool to be devolved to the State despite being one of the main contributors to the Centre’s revenue collection. Because of this, the State has incurred a shortfall in tax devolution of ₹26,410 crore over the past three years, with ₹10,858 crore in 2023-24 alone.
“Although the same party was in power at the Centre, the then State Government failed to protect the interests of the State by being a silent spectator without putting pressure on the Central Government to not accept the anti-State recommendations of the Commission,” the Chief Minister said in his budget speech.
He came down heavily on the Central Government for not giving ₹5,495 crore special grant for 2020-21, State-specific grants of ₹3,000 crore for holistic improvement of water bodies, and ₹3,000 crore for the Peripheral Ring Road, despite a recommendation for the same by the 15th Finance Commission. “Though the Union Finance Minister has been elected from our State, and despite the claims of a double engine government, the previous government failed in getting these grants from the Central Government,” Mr. Siddaramaiah said.
The Chief Minister further said the Centre’s assurance that GST will have an annual growth rate of 14% had been proved false. Coupled with discontinuation of GST compensation provided to the States from July 2022, this has caused a shortfall of nearly ₹26,954 crore in GST collections for 2023-24, which has had a severe impact on the fiscal position of Karnataka. The loss to the State due to the increase in cess and surcharges imposed by the Central Government, not shared with the States, is around ₹7,780 crore, and added that his government strongly condemns this.
He also said the Central Government had been gradually reducing the grant-in-aid allocation for Centrally Sponsored Schemes (CSS), making it inevitable for the State to increase its share for effective implementation of the schemes, resulting in shortage of funds for implementation of schemes of the State Government. For instance, in 2022-23, the Central Government contributed only 4.9% to the Social Security Pension scheme while the rest was contributed by the State Government.