With a likely shortfall in collection of taxes in the State and reduction in the Central pool of taxes, the State government is expected to raise funds from multilateral institutions such as the World Bank, Asian Development Bank (ADB), and domestic institutions such as NABARD and other market sources.
This expected to go into funding rehabilitation work in flood-affected areas, farm loan waiver scheme, irrigation and infrastructure projects, expected to spelt out in the State budget on March 5.
Big shortfall
The shortfall in collection of taxes in the State and receipts in the Central pool of taxes is expected to touch nearly ₹20,000 crore in 2019-20. The slowdown in the economy and below target collection of taxes both at the State and Central level were the major reasons for reduction in available financial resources in the State for funding projects and schemes.
The State can borrow up to 3% of its Gross State Domestic Product (GSDP) (up to ₹54,000 crore) as per the Karnataka Fiscal Responsibility Act. The H.D. Kumaraswamy-led government, in its budget 2019-20, borrowed up to 2.6% of the GSDP. The State cannot cross the prescribed 3% limit of the GSDP without the Centre’s approval.
The State budget for 2019-20 had proposed to borrow a whopping ₹46,127 crore from the markets in in order to finance its expenditure during the year.
Sources said the government is likely to approach the World Bank for funding the multi-crore Sujala Watershed project, and ADB for infrastructure and irrigation projects in the State. It is expected to borrow ₹1,100 crore from NABARD.
The financial crunch comes in the backdrop of the 15th Finance Commission fixing Karnataka’s share in Central taxes at 3.646% for FY 2020-21, which is 1.07% lower than the share of 4.713% awarded by the 14th Finance Commission. Cut in 15th Finance Commission, GST, and grants-in-aid from the Centre as well reduction in mobilisation of resources in the State’s own taxes could severely impact the funding of welfare/populist schemes such as Anna Bhagya and Indira Canteens, sources said.
Chief Minister B.S. Yediyurappa, who is presenting the State budget for 2020-21 on March 5, is expected to spell out the methods of resource mobilisation both from the domestic and multilateral institutions, sources in the State Secretariat said.
The government is making efforts not to reduce the budget size from that of last year’s budget, which was pegged at ₹2,34,153 crore.
In the Goods and Service Tax (GST), the Centre has to released about ₹17,000 crore to the State. But so far, it has released only about ₹11,000 crore. The Centre has promised ₹15,000 crore in the form of grant-in-aid but the State has received only 50% of the promised amount so far, sources said.
Karnataka has registered a moderate revenue collection of 73.6% in the first three quarters of the present fiscal (2019-20). The State’s revenue collection stood at ₹87,862.01 crore on December 31, 2019, against the target of ₹1,19,274 crore set for the year.
Longer office hours
To realise the target in the Stamps and Registration Department, the government has issued a circular to open all sub-registrar offices in the State from 9 a.m. to 6.30 p.m. on all working days till the end of this financial year (March 31, 2020).
