This Article is From Jul 07, 2023

Analysis: Karnataka Budget - 5 Guarantees And Their Relevance For Congress

It is not often that a state government's budget assumes as much critical, political and electoral significance as the one Karnataka's new Chief Minister Siddaramaiah presented today.

All eyes were on the state budget as the Chief Minister, who also holds the finance portfolio, carried out a mammoth task of preparing the budget that made provisions for the Congress party's 'Famous Five Guarantees'. The highlight of Siddaramaiah's 14th budget, seventh as Chief Minister, was mobilising funds for the Congress's five election guarantee schemes that, according to him, will require an estimated Rs 52,000 crore annually. Siddaramaiah presented the state budget of Rs 3.27 lakh crore. The total expenditure is estimated to be Rs.3,27,747 crore which includes revenue expenditure at Rs.2,50,933 crore, capital expenditure at Rs.54,374 crore, and loan repayment at Rs.22,441 crore.

The previous BJP government headed by Basavaraj Bommai had already presented an interim budget in mid-February. It was hailed as a budget that had crossed the Rs 3 lakh crore mark. Usually, in situations like these, when a new government presents a fresh budget, it is not very different; more often than not, it is like old wine in a new bottle. The new state government's budget will be actually operational for less than nine months, as the first quarter of the financial year is already behind us.

For the credibility of his new government and the Congress in Karnataka (and indeed for the party in the rest of the country), this budget had to show his and the party's commitment to making good the poll promise of implementing the Five Guarantees. The implementation meant the allocation of funds. If he couldn't suitably allocate, then the Congress's Lok Sabha chances would have been jeopardized.

The Congress's major guarantees were - Rs 2,000 monthly assistance to women heads of all families (Gruhalakshmi), 200 units of power to all households (Gruhajyoti), Rs 3,000 every month for graduate youth and Rs 1,500 for diploma holders (Yuvanidhi), 10 kg rice per person per month (Annabhagya) and free travel for women in the State public transport buses (Shakti). It is generally believed that the Congress came to power in the recent Karnataka election riding on these Five Guarantees, or by way of freebies. When the party returned to power, many experts felt that these freebies, if implemented, would be a huge burden on the state exchequer and may derail the prudent finances of the state.

What does the budget signal? While there is no doubt that the Siddaramaiah government has been under immense pressure to implement these guarantees, it is obvious from his budget today that the government is yet to come to terms with the requirements of implementation or the money that would be needed for the implementation. At the outset of his budget speech, Siddaramaiah said the implementation would require an estimated Rs. 52,000 crore annually.

Subsequently, the Chief Minister in his budget speech provided some details of funds planned to implement each of the guarantees. He said that the Gruhalakshmi scheme will cost Rs 30,000 crore annually; Rs 13,910 crore for Gruhajyoti, Rs 10,000 crore for Annabhagya scheme, Rs 4000 crore annually for the Shakti scheme under which women get free travel in government buses. Though he did not provide any specific figure in his speech for the Yuvanidhi scheme (unemployment allowance for fresh graduates and diploma holders), his budget documents referred to around Rs 250 crore annually. All these add up to almost Rs 60,000 crore annually - Rs 8,000 crore more than the Rs 52,000 crore round-up figure given by the chief minister.

However, the sum total of the actual budget allocations provided in the demands-for-grants for different government departments for the implementation of these five guarantees is just about Rs 37,000 crore. But if we go by the chief minister's estimates of funds required, the government would require up to Rs. 45,000 crore for the remaining 9 months of the financial year.

Where will even the apparently under-allocated money come from? The Chief Minister has proposed both increase in the collection and rate of taxes and duties and increased borrowings.

Already Basavaraj Bommai's interim budget had proposed to go for a record borrowing of Rs 77,000 crore which was proposed to meet the entire capital expenditure plans of the government. This government has increased it substantially to over Rs. 85,000 crore.

RS Deshpande, former director, Institute for Social and Economic Change, Bangalore, says: "Payment of interest is quite high and therefore fiscal deficit is about Rs 66,000 crore. Overall, Karnataka is not likely to get into a debt trap as meeting debt obligations is not difficult from its own resources. Apart from that Karnataka is one of the largest contributors to GST and the state's share of GST from the centre will offset some portion of the debt. Besides, there will be a good increment in the state's own tax revenues. The GST collection has increased by 50% in the last 3 years. This year, the state will increase the GST collection by Rs 10 to 12, 000 crore."

The government proposes to hike the existing rates of Additional Excise Duty on Indian Made Liquor (IML) by 20 percent; increase the Additional Excise Duty on Beer from 175% to 185%.

The guidance value on property registrations across the state has been increased. The revenue collection for the Stamps and Registrations Department has been set to Rs 25,000 crore for the 2023-24 fiscal year.

As was anticipated no new scheme has been announced by the government. "No new programmes have been announced. Bangalore infrastructure development gets Rs 45,000 crore, next only to the Rs 52,000 crore earmarked for implementing the five guarantees," says Dr Jayaramu. That should be music to the ears of Bangaloreans, who have been struggling with never-ending infrastructural woes for years.

The 'Guarantee Model' of Karnataka guaranteed Congress an impressive win in May 2023 State elections. The party wishes to replicate this model in Rajasthan, Chhattisgarh and Madhya Pradesh, where the assembly elections are due in the next one year. It is imperative for Siddaramaiah government to implement the guarantees in letter and spirit. Shoddy execution or short-changing on guarantees would mar Congress' chance not only in other state assembly elections but also in the Lok Sabha elections. And personally, Siddaramaiah would never like to quit electoral politics on a note that dents his credibility as a mass leader. The non-allocation of funds to the Yuva Nidhi scheme is already raising doubts in people's minds.

(Bharti Mishra Nath is a senior journalist)

Disclaimer: These are the personal opinions of the author