‘Mindful of challenges’: Karnataka govt on crisis in Himachal Pradesh

The opposition BJP has warned of a Himachal Pradesh-like crisis in the state due to ballooning subsidies.

Bengaluru: The Karnataka government on Monday told the Assembly that it was “mindful” of fiscal challenges even as the Opposition BJP warned of a Himachal Pradesh-like crisis due to ballooning subsidies.

During a discussion on the 2026-27 Budget, BJP’s V Sunil Kumar said 14 per cent of money was going into subsidy schemes.

“Over Rs 1 lakh crore has been spent on the ‘guarantee’ schemes. We know what the Supreme Court has said on freebies. The state is being pushed towards a subsidy culture. Members of all parties should discuss the long-term implications of this,” the Karkala MLA said.

Senior BJP lawmaker S Suresh Kumar said Himachal Pradesh, where Congress is in power, announced salary cuts and deferrals due to the ‘guarantee' schemes. “We need to have a survey on where our state is going,” he said.

Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu has deferred 50 per cent of his own salary by six months. The deferral is 30 per cent for ministers, 30 per cent for top bureaucrats and 20 per cent for MLAs.

Replying to this, Revenue Minister Krishna Byre Gowda said the government was “mindful of the challenges in the future” while maintaining that Karnataka’s economy was better than other states.

“The GST collection is a reflection of the state’s economic activity. Karnataka has the highest growth rate of 11 per cent, more than Maharashtra and Gujarat,” Gowda said.

Karnataka has India’s highest per-capita income (PCI), Gowda pointed out. “I’m not saying everybody has an income. But globally, PCI is an indicator of the economy. In the absence of a perfect equation, we use PCI,” he said.

Even as revenues of all states took a hit due to GST rate rationalisation, Karnataka performed better, Gowda said.

‘Demand-side economics’

Gowda defended the government’s spending on the ‘guarantee’ schemes.

“We have villanised subsidies,” Gowda said.

“In the last 150 years, there have been two economic approaches: supply-side economics to help manufacturers and producers, and demand-side economics to support citizens who’re purchasers,” the minister explained.

“On the supply side, tax concessions are provided. On the demand side, universal basic income is given to spur economic activity by putting more resources in the hands of consumers,” Gowda said.

According to Gowda, every rupee given to a person is used at least five times. “This is called the multiplier effect. That’s how economic activity grows. This leads to more demand. Ultimately, we need consumers to create demand. Without demand, will factors be set up?” he said, adding that money given to people at the bottom of the pyramid would come back into the market.

“This is 100-year-old Keynesian economics. Countries came out of depression with demand-side strengthening. It’s a sure show approach for economic growth,” Gowda said.