Drought, increased spend may slow Karnataka growth rate

Severe drought may keep Karnataka from surpassing last year’s economic growth rate of 8.5%, according to the mid-year review of state finances that was tabled in the Legislative Assembly on Thursday.

The review expressed concern that growth may be stunted in agriculture and allied sectors due to drought in many parts of the state.

Plus, delayed central funds have resulted in additional expenditure out of state’s own pocket, the review stated.

“The committee noted that though there is a drought in many parts of the state, especially northern Karnataka, the state has not yet received expected allocations from the Government of India under National Disaster Relief Fund. This has resulted in additional spending from state’s own resources for drought relief (sic),” the mid-year review said.

Delayed release of 14th Finance Commission grants to panchayat raj institutions and urban local bodies “would have adverse impact...,” it stated. Also, fund cuts in central schemes such as National Horticulture Mission, Sarva Shiksha Abhiyan, Swachh Bharat Mission and so on have “resulted in additional spending...”

The Fiscal Management Review Committee (FMRC) has instructed departments to regularly follow up with the Centre.

Chief Minister H D Kumaraswamy has been looking at ways to cut down spending in order to mobilise resources to fund his Rs 45,000-crore crop loan waiver. Still, the government has raised an additional revenue expenditure demand to the tune of Rs 6,980 crore through Supplementary Estimates that was also tabled in the Assembly.

“To offset the impact, the strategy of expenditure re-prioritisation within budget estimates and use of accumulated reserves in the public account would be adopted,” the report said.

The FMRC has asked the government to be “cautious” while scaling up expenditure “as this would be in the backdrop of conditions prevailing in national and state economy”. Floating inflation, vulnerability in oil prices and investment activity being affected by “geopolitical tensions.”

There is something to cheer about, however, as Karnataka has mopped up Rs 53,805 crore from own tax and non-tax revenue from April to September this year. Taking into account devolution of central funds and grants, the total own tax receipt stands at Rs 76,025 crore, which is 47% of what was budgeted for the full year.

Collection of commercial taxes, excise, motor vehicle tax and stamps/registration fees — own tax revenues — has shown “reasonable achievement”, the review said.