This Article is From Jun 25, 2019

15th Finance Commission Speaks Of "Enigma Of Two Karnatakas"

The debt to GDP ratio in Karnataka is rising and state needs to be mindful of this going forward, the commission cautioned, though it is aligned with the targets set as of now.

15th Finance Commission Speaks Of 'Enigma Of Two Karnatakas'

Karnataka represents an engine of India's economic growth: Finance Commission Chairman NK Singh


There is an enigma of two Karnatakas with the existence of both high per capita income and high poverty numbers in the state at the same time, the 15th Finance Commission said today, as it stressed on the need for closer attention on the matter.

Also, the debt to GDP ratio in Karnataka is rising and the state needs to be mindful of this going forward, the commission cautioned,though it is aligned with the targets set as of now.

Commission Chairman NK Singh said it was somewhat ironic that as one speaks of Karnatakaas India's engine of growth, home of technology and startup industries and where entrepreneurial instincts come naturally, per capita income is significantly higher than that of the nation, but poverty numbers were unacceptably high.

"In a sense as what many have said there is not one Karnataka, there are two Karnatakas," he said.

One was a prosperous Karnataka and alongside it one far less prosperous and which really demonstrated how intra-state disparities could mask really the overall performance,he said, adding that was an area deserving closer attention.

The Commission officials said according to information shared with them, the poverty rate in Karnataka stood at 21 per cent.

The Commission, which is on a visit to Karnataka for the last two days, has held discussions with all stakeholders, panchayat institutions, Urban Local Bodies, representatives of all political parties, as also interaction with Chief Minister HD Kumaraswamy, Ministers and government officials.

Mr Singh said Karnataka represents an engine of India's economic growth, contributing close to eight per cent of the national GDP and has spectacular records in terms of conformity on many components of financial discipline.

Noting that Karnataka was not only the first state, but preceded the national government in the enactment of the fiscal responsibility management act, Singh said the state has an exceedingly credible record of conforming to all the important macro-economic parameters.

He said the government has responded positively to concerns raised by a commission member that the debt to GDP was rising and the state would have to be ''mindful'' of remaining aligned with the broad trajectory.

Complimenting the Karnataka government,saying its fiscal numbers are more genuine and reliable compared to many states, the commission lauded the management of overall finances of the state.

"They have made credible progress with respect to most of the parameters of the sustainable development goals, exception education outcome and anemia in children, where there is still scope for improvement," it said.

Noting that Karnataka has faced eight years of drought in the last 10 years, Singh said there is drought proneness, a need to do a lot to improve irrigation to complete many languishing irrigation projects and to improve agriculture production and productivity.

He noted that Karnataka also argued that notwithstanding its proneness to frequent droughts,the resources they received in the last finance commission, particularly for NDRF and SDRF, was "below" what the state deserved.

"We will certainly look into this with the sympathy which this deserves," Singh said.

Chief Minister Kumaraswamy during his meeting with the Commission, said ''injustice'' has been done to Karnataka in allocation under State and National Disaster Relief Fund and urged it to substantially increase allocations for the state. He also brought up the point of much deeper rationalization of centrally sponsored schemes.

Mr Singh said Karnataka believes that following the 14th Finance commission's award, the sharing with respect to the centrally sponsored schemes has put an onerous burden on the state and therefore mitigates to a large extent, the benefits of higher devolution of funds.

"...this is also an area of generic concern to many states," he said. The Chief Minister informed the Commission that it must ensure that once the sharing formula is decided, the Central Government should not reduce the funding under the centrally sponsored schemes, both in terms of size and the sharing pattern between Centre and State.