CAG flags strain due to Congress' Karnataka guarantees: Rs 5,229 crore cut in infrastructure spend
According to the CAG report, which was tabled in the Assembly on Tuesday, the reduction in expenditure has also resulted in a 68 per cent delay in projects across the state. 'The State also reduced the capital expenditure towards infrastructure by around Rs 5,229 crore when compared to previous year. This has an impact on the increase in incomplete projects by 68 per cent when compared to previous year. This compression in gross capital formation may prove to be detrimental to future growth prospects,' the report stated.
Currently, the Siddaramaiah-led Congress government implements five direct benefit transfer (DBT) schemes: the Gruha Lakshmi (Rs 2,000 to each woman from poor households), Yuva Nidhi (a monthly unemployment allowance of Rs 3,500 for graduates and Rs 1,500 for diploma holders, Gruha Jyoti (free power), Anna Bhagya (free rice) and Shakti (free bus travel for women).
For the schemes, the government had allocated a total of Rs 36,538 crore, which amounts to 15 per cent of the state's revenue expenditure for the 2023-2024 fiscal year. It used the entire amount to implement the schemes, except the unspent Rs 40 crore of the Rs 7,384 crore allocated for the Anna Bhagya scheme.
While the state's revenue grew by 1.86 per cent in 2023-24 compared to the previous year, the expenditure grew by 12.54 per cent. 'The increase in growth of expenditure was mainly on account of the guarantee schemes which was the contributing factor for the Revenue Deficit of Rs 29,271 crore. This mismatch of receipt and expenditure during the current year (2023-24) had resulted in the state witnessing revenue deficit of Rs 9,271 crore after its recovery during 2022-23 from Covid-19 economic slowdown. Consequently, the fiscal deficit of the state also increased from Rs 46,623 crore in 2022-23 to Rs 65,522 crore in 2023-24,' the report stated.
'To finance the guarantee schemes and the deficits arising thereof, the state availed net market borrowing of Rs 63,000 crore which was Rs 37,000 crore more than last year's net borrowings (Rs 26,000 crore). This would not only increase repayment burden in the near future but also would enormously increase the interest burden…,' the report added.
The implementation of the five guarantee schemes without rationalising existing subsidies/ financial assistance and benefits will put a strain on state resources and have an influence on fiscal deficits and debt levels, the report has stated.
While admitting to the CAG's observations, the state finance department said the five guarantees boosted local economy, reduced economic disparities and supported the growth of human capital.
'Though the cash transfers such as Yuva Nidhi and Gruha Lakshmi empowered the youth and women and also gave security and enhanced their purchasing power, these cash transfers along with the other three subsidy schemes without rationalisation of existing subsidies would strain the financial economy of the state… The government in its medium-term fiscal plan 2024-28 has projected a revenue deficit of Rs 27,354 crore and thereby increasing its borrowings to Rs 1,05,246 crore,' the CAG noted.
The gap between the revenue receipt and revenue expenditure, which results in revenue deficits/surpluses shows that Karnataka had a revenue surplus of Rs 13,496 crore in 2022-23 (0.62 per cent of GSDP) and Rs 19,271 crore (0.36 per cent of GSDP) in 2023-24, the CAG noted.
'The state government spent Rs 52,120 crore on the capital account. This was around 17 per cent of the total expenditure in 2023-24. The borrowings exceeded the capital expenditure by Rs 38,160 crore and the amount was utilised for meeting the expenses towards five guarantee schemes,' the report stated.
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