Financial Situation in Karnataka

BSY1.    It is very unfortunate that Mr. Siddaramaiah, Leader of the Opposition Party, who was also the Finance Minister for 5 years, is making unfounded allegations about the financial situation of the State. As a former Finance Minister, he should have gone into the parameters determining the financial health of the State such as revenue deficit, fiscal deficit, borrowings as a percentage of GSDP and plan expenditure.

2.    Let him compare all these parameters between his period and our period; with the Central Government and State Government and with the neighboring States.

3.    I am very confident that Karnataka’s finances have been managed by our Government very prudently. We are well within the limits prescribed by the Fiscal Responsibility and Budget  Management (FRBM) Act.

4.    The Karnataka’s fiscal management has been highly appreciated by the 13th Finance Commission which visited Bangalore on January 2009 and by the Governor of Reserve Bank of India on May 14th, 2009.

5.    I am giving the following details for everyone to know the financial situation of the State.

Revenue Surplus:
In the last 4 Budgets, Karnataka has maintained a revenue surplus. All the four Budgets were presented by me.  In 2008-09, the revenue surplus was Rs.1570 crores.   Even in 2009 – 10, we will have more than Rs.1000 crores as revenue surplus inspite of the slow down in the economy. The Central Government and many States have not yet come out of the revenue deficit scenario.

Fiscal Deficit:
We have been maintaining the fiscal deficit within 3% upto 2007-08 and within 3.5% in 2008-09 as suggested and permitted by the Central Government. Even though the Central Government has suggested that we may go upto 4% this year, we will be very much within this limit.

Mr. Siddaramaiah, may look at this year’s Central Budget of UPA Government where the fiscal deficit has gone upto 6.8% which is more than double the fiscal deficit of Karnataka.

Total Borrowings:
The total borrowings of Karnataka Government were 24.77% of the GSDP in 2008-09 and not over 50% as alleged by Mr. Siddaramaiah.  Infact, this proportion has come down from 31% in  2004-05 when Mr. Siddaramaiah himself was the Finance Minister.

The total debt stock of the State stood at about Rs.66,000 crores in March 2009, as compared to over Rs.30 lakh crores of the Central Government. The neighboring States of Andhra Pradesh has Rs.1,26,000 crores, Maharastra has Rs.1,76,000 crores and Kerala, a much smaller State, has about Rs.65,000 crores.

Thus in comparision, Karnataka’s debt is very small and is within the manageable limits.

The interest payment of the State was more than 14% of GSDP in 2004-05 when Mr. Siddaramaiah was the Finance Minister. This came down to 10.46% in 2008-09.

The Central Government is going to borrow Rs.4 lakh crores (40%) to fund its budget of Rs.10 lakh crores, while Karnataka is borrowing  less than Rs.10,000 crores (16%) to fund its budget of about Rs.60,000 crore.

6.0    Plan Expenditure: Doubled in Four Years
Plan expenditure has gone up from Rs.11,889 crore in 2004 – 05 (Mr. Siddaramaiah’s period) to Rs.22,118 crore in 2008 – 09.

7.0     It is not true that the State Government is unable to pay salaries to its employees.  During the last 3 years, there has been no occasion when the State Government faced any difficulty in payment of salaries or meeting any other essential expenditure. The State Government, during this period has never had to take overdraft from the Reserve Bank of India.

8.0    The State’s total revenues last year was more than Rs.43,500 crores. The expenditure on salaries was only about Rs.10,000 crores.  So where is the difficulty in payment of salaries?  It is necessary for the Leader of the Opposition to study the financial situation in depth before making baseless comments misleading the general public.