Karnataka’s borrowings see sharp rise as spending pressure grows

In just two months -- between September and November -- the government’s borrowings skyrocketed 347% and cash pressures, especially the burden of having to fund the welfare-based 'guarantee' schemes and infrastructure development, are expected to drive up loans in the current fiscal.

Bengaluru: In just two months -- between September and November -- the government’s borrowings skyrocketed 347 per cent and cash pressures, especially the burden of having to fund the welfare-based “guarantee” schemes and infrastructure development, are expected to drive up loans in the current fiscal. 

According to finance department data, the government had borrowed Rs 7,349 crore by the end of September. This number rose to Rs 32,884 crore by the end of November -- that’s Rs 25,535 crore that the Siddaramaiah administration raised in a span of two months. 

“Most of our borrowings are back-ended, not front-loaded,” Additional Chief Secretary (Finance) L K Atheeq explained. “This means that we don’t borrow a lot in the first six to seven months of the financial year. We manage based on our earnings and cash reserves. This helps us save on interest,” he said.

“Towards the end of the financial year, in January and February, borrowings will pick up,” Atheeq said. 

In the current 2024-25 fiscal, Karnataka has estimated total borrowings of Rs 1.05 lakh crore. Last year, the state borrowed Rs 90,280 crore. 

According to Atheeq, money borrowed is used to repay outstanding loans and fund development works. 

However, finance department data shows that the government is fiscally bleeding in servicing loans. Sample this: Between April and November this year, the government has spent Rs 33,381 crore on paying principal and interest on outstanding loans.  

This means that the government needs an average of Rs 4,141 crore a month to repay outstanding loans. 

By the end of the current fiscal, Karnataka’s total outstanding liabilities are estimated to touch Rs 6.65 lakh crore. 

The total outstanding liabilities is 23.24% of the GSDP, which is within the 25% limit set under the Karnataka Fiscal Responsibility Act.

The total outlay for the ‘guarantee’ schemes this year is Rs 52,009 crore. The monthly requirement is Rs 4,334 crore. Up to October this year, the government has spent Rs 24,235 crore. 

The government cannot forecast budgetary requirements for the ‘guarantee’ schemes due to “variation” in the number of beneficiaries, Chief Minister Siddaramaiah told the Legislative Assembly recently. 

The finance department, however, has been pushing for more targeted spending when it comes to the ‘guarantee’ schemes, which may include capping the total cost of the schemes at Rs 40,000-45,000 crore, according to sources.