The high borrowings of about ₹53,000 crore for capital expenditure, that is about 22% of the total revenues, may increase the total debt of the State, but the government, which is staring at reduced grants from the Centre, has limited leeway. For, about 59% of the estimated expenditure goes towards salaries, pension, debt servicing and other revenue expenditure, while another 10% goes into committed subsidies. This leaves the government with limited funds for creating assets and infrastructure that spur economic activity.
The borrowings of ₹53,214 crore is up from ₹46,127 crore in 2019-20. This takes the total borrowings of the State to ₹3.68 lakh crore, or about 20.42% of the GSDP. The State is expected to spend about ₹22,216 crore on payment of interests in 2020-21. The fiscal deficit — an indicator for borrowings — is estimated to be around ₹46,000 crore.
While just about 20%, or ₹43,000 crore, will be spent on creating assets such as buildings and roads, Chief Minister B.S. Yediyurappa also pointed out at the increased expenditure towards salaries and pension to a tune of ₹10,000 crore at a time when the State was set to lose ₹11,000 crore because of the 15th Finance Commission’s recommendation. The Chief Minister also said that despite borrowing, the State had continued to adhere to the Karnataka Fiscal Responsibility Act, both in terms of fiscal deficit and borrowings.
The Economic Survey pointed out the State’s limited flexibility in allocation of resources for new schemes. Though it said that the capital outlay, as percent of GSDP in expenditure, had increased slightly from 2.38% in 2018-19 to 2.52 % in 2019-20, it said that this posed a great challenge and was a matter of concern because of the prevailing infrastructure inadequacies.
In another worrying factor for the State, the non-tax revenue — which if collected optimally can boost revenues — has been reducing. The non-tax revenue is estimated to be around ₹7,767 crore. Karnataka has one of the lowest non-tax revenues to GSDP in the country. It has been around 1% for the past five or six years.
