Banking on hope

The Economic Survey of Karnataka presented in the Assembly on Thursday indicated the critical economic situation of the state. Last year there were unprecedented flash floods in the traditional drought-prone areas in North Karnataka that had taken a huge toll on the state resources despite the help from all the quarters. More than 20 lakh hectares of crops got washed out and about 300 villages were severely affected.

Not many have said much about the handling of the situation but one must appreciate that the machinery has done its best so also the people of Karnataka who supported the calamity fund. This was one of the reasons given in the budget for the precarious financial situation. The preceding year also posed a formidable challenge in terms of low growth rates across sectors. The GSDP from primary sector had grown at a miniscule rate of 0.1 per cent and thanks to the other sectors which had kept the aggregate growth rate ticking at 4.5 per cent. On this background this budget envisages a growth rate of 5.5 per cent per annum at constant prices.

But the moot question is: given the existing and charted out investment, will this come true? There is little on the production side to achieve this. The state will have to depend a lot on the manufacturing and services sector and the promised investment that comes from outside.

The pre-budget assessment of fiscal situation of the state was quite grim as the revenue receipts did not show the expected growth. The estimated revenue receipts of Rs 32,721 crore in 2009-10 could not be realised and fell short by Rs 3,300 crore. Despite the increased grants from the Central government of Rs 7,572 crore, there was a shortfall in the revised estimates.

Fund shortage
The chief minister was confronted with a critical fund shortage with revenue efforts in the first six months showing signs of concern which were revived afterwards. But the revival was not really great to match the requirements of expenditure. 

Now the present budget shows a revenue surplus Rs 500.49 crore whereas, the fiscal deficit is put at Rs 9,708.46 crore.  The chief minister has indicated that a non-loan capital of Rs. 2,903 crore will be raised in order to meet the deficiency on the fiscal side. The additional chief secretary, Finance, must have spent sleepless nights in order to tally the budget and this was possible only with the help of some dis-investment and a few prudent tax proposals. The total expenditure in 2010-11 is estimated to be Rs 70,063 crore consisting of Rs 53,138 crore of revenue expenditure and Rs 16,925 crore of capital expenditure. The government expects to collect Rs 36,228 crore of tax revenue and Rs 2,820 crore of non-tax revenue. The total central transfers, including taxes and grants are expected to be Rs 14,591 crore. That matches the revenue and expenditure side. The chief minister chalked out a fivefold strategy for the budget that includes: Promotion of agricultural and industrial growth, human resource development, empowerment of weaker sections and development of backward areas.

Agriculture and horticulture sectors have been provided allocation of Rs. 2,094 crore and about Rs 2500 crore is provided for supplying free electricity to irrigation pumpsets  and  Bhagyajyothi/ Kuteerjyothi schemes. Besides, Rs  320 crore go for facilitating farmers to get subsidised loans  from commercial  banks and cooperative institutions.
The budget also gave importance to agriculture infrastructure (Jalasiri), with a promise of 2 lakh water-harvesting structures and a scheme called, 'Nirantara Jyoti'  for 126 taluks, to provide electricity  supply  to irrigation pumpsets and the rural habitations in 2 years.
 The CM has allocated a hi-tech rice technology park and establishment of new institutions is given high priority. These include: ‘Antharganga Micro-irrigation Corporation’ with a capital of Rs 100 crore, Karnataka Mango Development Board with a provision of Rs 10 crore and a Food Processing Development Corporation is to be established with a capital support of Rs 10 crore.

 The budget promises quite a few interesting things viz, the micro irrigation, Krishi Melas, concession on the RTC, emphasis on horticulture, veterinary colleges at Shimoga and Hassan. Similarly, Suvarna Gramodaya Yojana along with rural roads. There are a number of such small schemes for many activities in the budget and the chief minister probably wanted to have a multi-pronged strategy rather than getting into single track development strategy.

Impact poverty
The development theme of this budget seems to be creating employment through various means so that, it will indirectly impact poverty. The chief minister has provided quite a bit of investment for the development of roads, rural development and urban infrastructure.

He has emphasised on tourism as one of the major service sectors that helps to generate secondary employment as well as income to the state enterprises. Small scale industries as well as industrial development have been put on the high agenda but one should wait to see the process of implementation which usually has its own faults.
When one looks at the relative allocations, the impression carried is to cover a large number of areas rather than focusing on a specific development paradigm. In that case, one can classify the budget as trying to satisfy many, but not arguing any single development paradigm.

(The writer is director, Institute for Social and Economic Change, Bangalore)

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