Karnataka floods may hit state's growth: Report

The floods that hit North Karnataka in August this year. DH File Photo

Karnataka’s economic growth may slow down this fiscal due to severe floods that ravaged several parts of the state affecting investments and development activities, according to the Mid Year Review of State Finances 2019-20 tabled in the Assembly on Friday. 

The state’s gross state domestic product (GSDP) during the previous 2018-19 financial year was 9.6%. 

But this year, the “havoc caused by floods in the state has affected the socio-economic conditions”, the report said. “This has an adverse impact on investment in infrastructure and other development activities. Because of which, the growth may get contracted for the current year.”

There is “increased pressure” on the state government to carry out relief activities in the flood-affected districts and for the requirement of funds, the report said, citing an observation made by the Fiscal Management Review Committee headed by Chief Secretary T M Vijay Bhaskar. 

The government has already made available Rs 5,000 crore by reallocating budgetary grants and through supplementary estimates for the flood relief.

Owing to increasing demand for flood relief, the Finance department has been advised to consider additional resource mobilisation measures, which may involve a hike in taxes or levies that will hit citizens. 

The government has also tabled the second installment of Supplementary Estimates worth Rs 7,927 crore to account for expenditure towards flood relief.

Karnataka is also worried about a cut in its share in the divisible pool of Central taxes. So far, the state has received Rs 14,668 crore from the Centre by way of devolution, out of Rs 39,806 crore estimated this fiscal. 

According to the mid-year review, the July 5 Union budget indicated the devolution as Rs 38,134 crore, which is Rs 1,672 crore lower than the amount indicated in the February budget. “Subsequent to the budget presented in July, the Finance Minister has announced reduction in corporate income tax...This may have an adverse impact on devolution as the divisible pool of taxes may come down,” the report said. 

The state’s own tax revenue, which includes commercial taxes, excise, motor vehicle taxes and stamps & registration, have shown “reasonable achievement” during the first six months of the 2019-20 fiscal with the government having mopped up Rs 59,062 crore, which is 50% of the target. 

The state’s non-tax revenue, which majorly involves mining, interests and other receipts, stands at Rs 2,919 crore, which is 36.2% of the target.

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