For the first time since 2012-13, Karnataka’s Gross State Domestic Product (GSDP) growth rate has been negative, at -2.6%. The GSDP has shrunk from ₹11.43 lakh crore in 2019-20 to ₹11.13 lakh crore in 2020-21.
From reduced revenue collection and share in Central taxes, the State, which fought the COVID-19 pandemic most of this financial year, saw a reduction from most avenues while it recovered lost ground in some crucial tax collection segments. A look at the revenue and capital receipts of the State shows that while the share of Central taxes decreased from 1.82% to 1.58% of the GSDP, the share of grants from the Union government also decreased from 1.17% to 0.86% of the GSDP. The State’s own non-tax revenue also decreased slightly from 0.44% to 0.43% of the GSDP.
Karnataka’s share in Central taxes is anticipated to decrease by ₹2,328 crore, or 7.53%, in 2020-21 from the previous year. The tax devolution from the Centre has come down from ₹30,919 crore to ₹28,591 crore. The State saw a reduction in grants (excluding Goods and Services Tax compensation) from the Centre, from ₹19,840 crore in 2019-20 to ₹15,454 crore in this fiscal. The State’s share in GST compensation came down by 6.57%, from ₹17,249 crore to ₹16,116 crore.
However, GST collection has seen a 10.69% increase, from ₹42,748 crore to ₹47,313 crore. The State tax revenue, which constitutes the largest share, increased from 7% of the GSDP to 7.09%. Revenue from the State’s own tax is expected to be ₹1.28 lakh crore this fiscal, up from ₹1.18 lakh crore the previous financial year.
On the non-tax revenue side, it marginally increased from ₹7,508 crore in 2019-20 to ₹7,767 crore this fiscal. The annual economic survey said that the ratio of non-tax revenue to total receipts has been continuously very low over the years. The State has among the lowest non-tax revenue-to-GSDP ratios in the country — about the 1% mark for the last five or six years — which has been attributed to low recovery cost.
With the pandemic leading Karnataka to increase borrowings to meet its expenditure, the total liabilities of the State government increased from ₹3.25 lakh crore to ₹3.68 lakh crore, which is at 20.42% of the GSDP. This fiscal saw capital receipts, including loans from the Centre and internal debt, of ₹50,148 crore — a 17.2% increase over the last year. While loans from the Centre accounted for ₹1,844 crore, internal borrowings stood at ₹43,472 crore.
