Not enough resources for Karnataka to become $1 trillion economy: CM Siddaramaiah

Bengaluru: Flagging “many challenges” on the fiscal front, Chief Minister Siddaramaiah said Saturday that Karnataka does not have adequate resources to become a $1 trillion economy by 2032 and argued for the state to get a fair deal in the tax devolution.

Siddaramaiah was speaking at a national seminar on ‘Fiscal Federalism: Challenges before the 16th Finance Commission’ organised by the MS Ramaiah University for Applied Sciences.

“The state has many challenges in sustaining its economic growth even while ensuring that it is balanced and inclusive. In addition, the state has to cope with the budgetary implications of the centrally-sponsored schemes,” Siddaramaiah, also the finance minister, said.

“Furtherance of the state’s economic and human development requires significant investments in human and physical infrastructure. Despite Karnataka’s proven track record of very sound own-tax performance, the resources are not adequate to meet the growing challenges and also attain the vision of $1 trillion GSDP by 2032,” Siddaramaiah said.

Karnataka will make “a strong representation” to the 16th Finance Commission to examine “current anomalies” in the federal fiscal transfers, Siddaramaiah said, adding: “It's time for the transfer criteria to place sufficient emphasis on efficiency along with the equity concerns.”

Siddaramaiah pointed out that Karnataka’s share in share in tax devolution fell from 4.713% under the 14th Finance Commission to 3.647% under the 15th Finance Commission. “Karnataka has experienced the biggest cut among the states,” he said, adding that the state lost out due to the income distance criterion.

“...high per-capita income levels arise mainly from Bengaluru Urban district at Rs 6,21,131. This approach has deprived Karnataka of adequate resource transfers to address the low per-capita income of certain districts,” Siddaramaiah explained, citing the per-capita income of Kalaburagi at Rs 1,24,998.

Siddaramaiah rued that Karnataka, being the second highest tax paying state, does not get "adequate reward" for its contribution. "We’ll urge the 16th Finance Commission to increase the weight assigned to tax effort...to incentivize efficiency and fiscal performance,” he said.

Underlining the significance of resource transfers, Siddaramaiah said states have major expenditure responsibilities “very often not backed by commensurate revenue sources”. He said urbanisation had increased infrastructure and basic services demands in cities. “The problem is compounded by the increased pressure...on account of growing migration.”

Stressing on the need to support Bengaluru's needs, Siddaramaiah also flagged “glaring” imbalances in the human development index. The HDI in Bengaluru Urban is 0.738 against Yadgir (0.538), Kalaburagi (0.539) and Raichur (0.562), he said.