Interest bleeds as Karnataka CM preps for Budget

By the end of this fiscal, Karnataka would have spent a whopping Rs 27,160 crore on paying interest on loans alone, a 76% increase in three years.

Such ballooning commitments are likely to make Chief Minister Basavaraj Bommai’s maiden budget a tightrope walk. Bommai, the finance minister, is likely to present the 2022-23 Budget in March and preparations are on.

Since 2018-19, Karnataka has spent Rs 83,021 crore on interest, which is rising due to increased borrowings. At the end of March 2021, Karnataka’s outstanding loan was Rs 3.07 lakh crore.

Bommai is expected to make a push for welfare measures and beneficiary-oriented schemes. For instance, he wants to announce something for women, especially SC/STs, in the entrepreneurship space. He will also have to provide for infrastructure, especially Bengaluru for which the government has approved a Rs 6,000-crore package.

“Unless we borrow, we can’t spend. All our capital spending happens on borrowings only,” a senior official said.

“It will be a difficult budget,” the official said because Bommai wants to make an impact in the 2022-23 Budget and not depend on the 2023-24 Budget, by which time Karnataka will face elections. “There are so many demands. It will be a tightrope walk.”

The Covid-19 pandemic dented the state’s finances, forcing the government to borrow more.

In 2020-21, the government borrowed Rs 84,527.95 crore, which was Rs 31,610.44 more than what was shown in the budget. In the 2021-22 Budget, the government can borrow up to Rs 71,331.82 crore. “We will not exceed this. In fact, with the economy recovering, our borrowings may be lower this year,” the official quoted earlier said, adding that it is anybody’s guess how the third wave of Covid-19 will be.

The finance department is trying to convince Bommai to consider consolidating the existing schemes before announcing new ones. “There’s already a plethora of schemes. A good budget is one that consolidates. We have not been able to do that,” the official said.

The previous BS Yediyurappa administration took a new approach by making sector-wise budget announcements, instead of the conventional department-wise. “That was just in the budget speech. On paper, it was still department-wise,” the official rued.

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