Political parties are promising various concessions to the general public ahead of the assembly elections to be held in Karnataka on May 10. Though the state is financially prosperous enough to deliver on these promises of political parties, its expenditure continues to rise steadily. Due to this, the scope of distribution of free hawkers with the government seems to be reducing a lot.
In all the promises made by political parties, Congress has announced that if it comes to power, it will give free electricity up to 200 units to the common people. Apart from this, 10 kilograms of rice will be given to poor families, Rs 3,000 per month to unemployed graduates and Rs 1,500 per month to unemployed diploma holders for two years.
The Janata Dal (Secular) will provide assistance of Rs 10,000 per acre to farmers to purchase seeds and fertilizers for up to 10 acres of land under the Ryot Bandhu programme. While the Aam Aadmi Party (AAP), contesting elections for the first time in Karnataka, has promised 300 units of free electricity to domestic consumers. Along with this, the party is talking about free city bus travel for the students of the state, mohalla clinic and giving Rs 3,000 to the unemployed till they get a job.
Karnataka is not a poor state. Its own tax revenue (OTR) has been more than 70 per cent of its total revenue receipts in recent years and is likely to remain around 73 per cent in the current financial year as well. The revenue deficit of the state is also not high. It is also said to have a small revenue surplus of 0.02 per cent for this fiscal.
However, its liabilities such as salaries, pensions, interest payments and administrative expenses are estimated to be 60 per cent in FY24. Which was earlier 55 percent in FY 23 and before that it was 45 percent in FY 2021-22.
The state is also going to implement the seventh pay scale from the next financial year. In the budget for the year 2023-24, it was said that by giving the benefit of the seventh pay scale to the government employees, there will be a huge increase in the liabilities of the salary and pension head of the Karnataka government in the coming years.
It said that the additional financial burden for the first year of implementation of the seventh pay scale, based on the fitment factor, would be between Rs 12,000 crore and Rs 18,000 crore.
According to the budget letter, if expenses like subsidies, financial assistance to local bodies are added to this, then the total expenditure under this head can be 92 per cent of the revenue receipts in 2023-24.
This shows that the revenue of the state is not enough to meet the free revelry done by the political parties. Provided that the fiscal deficit should be increased along with the revenue deficit. Presently, the fiscal deficit is within three per cent of the Gross State Domestic Product (GSDP). Otherwise, it will have to reduce its capital expenditure. It is estimated to be Rs 58,328 crore in the financial year 2023-24, which is a little more than one-fourth of the total expenditure of Rs 2.25 lakh crore.
The State Government has also sent a team of its officers to Rajasthan to study the Old Pension System (OPS). If political parties do politics to bring back OPS to fight with each other, then there can be more trouble in distributing freebies. However, this is not expected to happen immediately.
The state’s economic growth has been matching the country’s GDP and has even exceeded it in recent years. For example, the state’s economy has grown at 9.5 per cent, which is slightly higher than the national average of 9.1 per cent.
The unemployment rate of the state is slightly lower than the national average. For example, in the year 2021-22, the national average was 4.1 per cent, while the state’s rate was 3.2 per cent. This trend is continuing from the year 2018-19.
The state’s retail price inflation also matches the national average. But, earlier it was slightly lower than the latter in recent months. In the first 11 months of this financial year, the inflation rate in the country was 6.7 percent. This was higher than the Reserve Bank of India’s (RBI) cap of 6 per cent but slightly lower than 5.5 per cent in Karnataka. However, the inflation rate in Karnataka was 6.03 per cent in February, which was higher than the RBI ceiling. Still it was less than 6.44 per cent nationwide.
