Bengaluru: The state government has said that its revenues are more than sufficient to meet the committed expenditure liability on salaries, pensions, interest payment on earlier borrowings etc.
Stating this while clarifying some of the points raised in these columns on May 13, the Karnataka government said fears that “the government’s dependence on market loans has seen a spike and that the loan waiver scheme has adversely affected the capital expenditure” were unfounded.
“The l5th Finance Commission has not specifically made any adverse observations against Karnataka finances during its two-day interaction with representatives of bankers, economists and heads of financial institutions in Mumbai. It is to be noted that Karnataka is the first state to bring out the Fiscal Responsibility Act (to ensure fiscal discipline) in 2002 even before Government of India (did),” it said in a statement.
The statement noted that Karnataka has not violated any of the fiscal parameters specified under the Act for over a decade. “Even with regard to its borrowings, Government of Karnataka has never breached the limit set by Government of India on annual borrowings.”
The statement, issued by the Budget and Resources Section of Finance Department, added: “It is also clarified that the budgetary provisions
for loan waiver scheme in 2018- 19 (both commercial and co-operative banks) were not at the expense of capital expenditure.
“In fact, capital expenditure has seen continuous year-on-year growth”.
The statement noted the article appears to have confused revenue shortfall against protected revenues of first five years as per law made by Parliament with revenue deficit which are two different things.
“While it is true that GST revenues of the state are less than that of the protected revenues, it is true for all the states and not specific to Karnataka.
“The GST compensation is being provided by the Government of India in lieu of the shortfall in revenues. As it would take some time before GST system stabilises, the state government has requested the Government of India for extension of compensation till 2025.
“Revenue Deficit is an entirely different concept and it is clarified that Government of Karnataka has never been revenue deficit since 2004-05,” the government’s statement said.
It added: “While it is true that the liberty of state to increase taxes on its own has come down with GST, the state government is making every effort to reduce its dependence on GST compensation.”