Prosperous Karnataka's poor secret

In a stinging observation, the 15th Finance Commission on Tuesday expressed perplexity at Karnataka’s “unacceptably high” rate of poverty despite the per capita income that exceeded the national average.

Karnataka’s per capita state income was Rs 1,83,737 in 2017-18, well above the per capita national income of Rs 1,12,835. Despite this, the 15th Finance Commission noted that the state’s poverty rate stood at 21%.

“It’s somewhat ironic as we speak of Karnataka as India’s engine of growth and as the home of technology and startups, where entrepreneurial instincts are natural. How does one explain such prosperity and such entrepreneurship along with high levels of poverty? Given the per capita income, the poverty rate is expected to be well below 20%. This deserves closer attention,” commission chairperson N K Singh told a news conference after holding talks with Chief Minister H D Kumaraswamy and other top government officials.

The disparity, Singh said, pointed to the existence of two Karnatakas.

“One is the prosperous Karnataka that represents the burst of entrepreneurial energy attracting migrants from all over India, thus making it truly cosmopolitan. The other is far less prosperous, which demonstrates how intra-state disparity can mask the overall performance.”

The commission, which is on a visit to the state, expressed concern over poor agricultural growth rate and incomplete irrigation projects languishing for years even as only 33% of the state’s area was irrigated.

It was commission member Ramesh Chand who raised this issue during talks with the government.

“Karnataka took up several innovative initiatives, but their result is not reflected in the performance in the agriculture sector. If you look at data for the last 7-8 years, agriculture is either stagnant or slightly shrinking. It’s -0.3%. This must be reversed. Even a drought-hit state like Rajasthan has an agri growth rate of 3%,” Chand said.

The commission warned the government over rising debt. “The state’s debt profile seems to have deteriorated,” Singh said. Commission member Anoop Singh explained this concern, “The debt-to-GSDP ratio has gone up, while it still remains below 20%. But as you look ahead 5-10 years, there’ll be pressures from all sides to spend more. So there has to be caution on how this will be financed — through more revenues rather than more debt.”