A welfare budget, with polls in mind

Karnataka Chief Minister Siddaramaiah has often been acclaimed for his financial prudence, and rightly so because fiscal discipline marked the previous budgets he presented even while pushing many populist schemes. He also has the credit of presenting the state’s first revenue surplus budget over a decade ago. The budget he presented on Friday is, however, a departure from this record, with the revenue deficit crossing over Rs 12,500 crore.

Admittedly, this is due to the Rs 52,000 crore that he had to set aside to fulfill the five guarantees promised by the Congress in its election manifesto. His predecessor, Basavaraj Bommai, had presented a budget, although he should have ideally presented only a vote-on-account, with a total expenditure of Rs 3,09,183 crore and a revenue surplus of Rs 402 crore. Siddaramaiah has estimated a total expenditure of Rs 3,27,747 crore.

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The Karnataka Fiscal Responsibility (KFR) Act requires the state to present a revenue surplus budget. The revenue deficit projected is thus a violation of the Act. Siddaramaiah must hope for redemption from the fact that the expenditure on the guarantees will benefit some 1.3 crore families, and will accrue to the state in indirect ways.  

With the introduction of GST, the state has little headroom to raise its own revenues. To Siddaramaiah’s credit, he has not resorted to excessive borrowing to fund the guarantees. The fiscal deficit has been maintained at 2.6 per cent of GSDP (Gross State Domestic Product) as against the cap of 3 per cent, while the total outstanding liabilities is 22.3 per cent of the GSDP, as against 25 per cent permitted by KFR Act. One of the fall-outs of the budget will be an increase in property prices as Siddaramaiah proposes to raise Rs 25,000 crore through stamps and registration. Liquor will also be dearer, with an increase of 20 per cent in excise duty and an annual target of collecting Rs 36,000 crore.

That the budget has something for all sectors -- impetus to irrigation, schemes for farmers, a new education policy, special schemes for women, children, weaker sections and minorities, strengthening of gram panchayats, and, of course, the unmissable annual promise to upgrade Bengaluru to a world-class city – has to do with the upcoming Lok Sabha election. While there is nothing radically new in Siddaramaiah’s proposals, it is a welfare budget out-and-out. The Chief Minister has promised to strike a balance between welfare and development and to take steps to rejuvenate the economy by, among other things, increasing capital expenditure. This should not remain a mere promise. The success of the welfare measures will lie not in how many people enroll for the handouts but in how many can be weaned off them and how soon.