Karnataka gets approval for for reforms-linked borrowing

Karnataka has secured the Union Commerce Ministry’s approval for additional borrowing after the state government showcased over three dozen “ease of doing business” reforms, which include property registration, permission to start schools and other such procedures that have gone online.

The commerce ministry has recommended to the finance ministry to allow additional borrowing for the state.

With this, Karnataka can borrow an additional 0.25% of its gross state domestic product (GSDP).

The state’s GSDP is Rs 16.52 lakh crore. On that, 0.25% will work out to Rs 4,131.6 crore that the state can now borrow.

“We are among the first Indian states to have received the nod for additional borrowing for having implemented reforms,” Commissioner for Industrial Development Gunjan Krishna told DH.

The “ease of doing business” reforms largely involve making services available online. It also includes computerising the inspection of factories, which will now happen at random to prevent harassment or nepotism. Also, trade licences will be renewed automatically obviating the need to run from pillar to post. “We are one of the fastest in the country to implement the reforms, which involved changes in services offered at various departments and at the district level,” Krishna said.

Karnataka has also executed the ‘One Nation, One Ration Card’ initiative, according to Additional Chief Secretary (Finance) I S N Prasad.

This single reform would allow the state to borrow another 0.25% of its GSDP. This is another Rs 4,131.6 crore.

Reforms to augment revenues of urban local bodies are under progress, while the state government is said to be wary of taking up some reforms in the power sector fearing a backlash.

To help states tide over the economic crisis due to the Covid-19 pandemic, the Centre relaxed the limit of borrowing from 3% of GSDP to 5%. This allowed Karnataka to borrow Rs 82,621.6 crore. Of the additional 2%, the Centre allowed additional borrowing up to 0.5% and another 0.5% for having chosen the Centre’s first option on GST shortfall compensation. The other 1% was tied to sectoral reforms, which Karnataka claims to have achieved.

The Covid-induced economic crisis hit Karnataka hard as revenue streams dried up due to the lockdown. The B S Yediyurappa administration is not shying away from raising loans to fund development.