Karnataka Budget 2020-21: Attempts of Building Castles in the Air

The media has been rallying that it is a 'taxless budget'. It must be noted that GST has taken away the powers of the state to levy taxes.

PC: Deccan Herald

Karnataka is now facing two types of pandemics. First, the Covid-19 pandemic. Second, the step-motherly attitude of the Union (Indian) government towards it. While the first is global in its character and is natural, the second is the injustice done by Union Government to Karnataka. The economy of the state in 2020-21 and 2021-22 is hit by the immense crisis in both 2020-21 and 2021-22 because of these pandemics.

Our economy has fallen to dust because of Covid-19. As a result, between the years 2019-20 and 2020-21, the State Domestic Produce fell from Rs. 18.05 Lakh Crores to Rs. 17.02 Lakh Crores (Decrease of 5.71%). In 2018-19, the amount that Karnataka received from the pool of taxes of the Union Government was Rs. 35894 Crores. But, in 2019-20, the state received only Rs. 30919 Crores. According to the revised estimates of 2020-2021, the figures stood at Rs. 20053 Crores. As per the budget estimates of the current year (2021-22), the figures stand at Rs. 24274. Similarly, the assistance grant provided by the union government to the state stood at Rs.14144 crores in 2020-21. For 2021-22, it stands at Rs. 15537 crores.

This implies that the decrease in the transfer from the union government to the state between 2018-19 to 2019-2020 was Rs. 4975 Crores while it increased to Rs. 10866 between the years 2019-20 and 2020-21. Similarly, the assistance grant was reduced from Rs. 19839 Crores to Rs. 15537 Crores.  This meant that the cut was Rs. 4445 Crores. What else apart from pandemic must the Union (Indian) government’s step-motherly attitude towards the state be called?

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The total amount is a criterion to evaluate a budget. Expenditures of the budget have increased from Rs. 2.37 lakh crores to Rs. 2.46 lakh crores between the year 2020-21 and 2021-2022. With a mere increase of 3.78%, what rate of economic recovery can we expect? Most importantly, Rs. 27160 amounting to 41% of the total budget for 2020-21 is towards payment of interest on loans. In an understanding of public economics, government raising loans is not an issue. However, it becomes important how the amounts raised through loans are spent. Karnataka’s revenue deficit in 2020-21 was Rs. 19985 Crores. In 2021-22, this stands at Rs. 15133 Crores.

Karnataka has been a state that has been achieving surpluses in its revenue accounts since 2004-05. This accomplishment has now been shattered. If the loans raised by the government has to be used not as capital investments but to make up for the deficits or towards payments of interest, then development cannot be achieved. It must be told that management of finances has not been effective over the last two years. The step-motherly attitude of the Union Government towards Karnataka is as much a reason for it as is the Escapee state.

Union Government unwilling to share the taxes collected on petrol, diesel, and cooking gas with the states is yet another injustice done by Union Government towards the states including Karnataka. Because these taxes are not included under GST. The amount of taxes collected by the Indian Government on these products stood at Rs. 2.37 and Rs. 3.01 lakh crores in 2016-17 and 2020-21 respectively (Statment of the Minister of Petroleum, Natural Gas and Steel Dharmendra Pradhan). This is not a small percentage. This has not been with the states by the Union Government. This is yet another way in which pandemic wounded Karnataka.

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There’s another way in which the union government is doing injustice to the state. This has been divulged by the Chairperson of the 15th Finance Commission NK Singh. Cess and Surcharges are not included in the tax pool which can be shared between the Union and the states. According to NK Singh, from the years between 2021-22 and 2025-26, the projected tax collections stand at Rs. 135.2 lakh crores. Of it, Rs. 103 lakh crores would be the amount to be shared between the union and the states after excluding cess and surcharges. If Rs. 135 crores would be shared, the states would receive 55.43 lakh crores (41%). However, now, the states are entitled for Rs. 42.23 lakh crores only. The share of cess and surcharges of the union taxes that stood at 10.4% in 2011-12 has now increased to 20% in 2020-21. All these are contradictory to the federal structure provided by the Constitution. Karnataka is failing to manage its budget and development because of these acts of the union government.

Finance Commission’s injustice to the state

Aggravating injustices done by the union government to the state, the 15th Finance Commission has reduced Karnataka’s share of the taxes collected by the union government from 4.713% as recommended by the 14th Finance Commission to 3.646%. This results in a cut of Rs. 32001 crores in comparison to the recommendations made by the 14th Finance Commission. (For Details, pp 328 of the Final report of the 15th Finance Commission and pp 95 of the report of the 14th Finance Commission).

Budget and Women and Child Welfare Schemes

The honorable Chief Minister presented the budget on 8th March which marks International Women’s Day and proclaimed that women have been provided with special provisions. If that is the case, can this budget be said as being gender-sensitive? Definitely not. The very way in which the budget is thought to be intended towards the causes of women is problematic.  For example, in the 2020-21 budget, the programs intended towards women’s causes were 953 for which the government had provided Rs. 37785 crores which were 15.88% of the total amount of the budget. This year, the amount provided towards the same has decreased to Rs. 37187(15.10% of the total budget). Which class of women has this budget targeted? For example, according to the Census of 2011, a number of women cultivators and landless women involved in wage labour stood at 38.72 lakhs. What’s there in the budget about them? Which program addresses their food security, reproductive health, and childcare concerns?  None.

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The budget speaks of women entrepreneurs. The budget provides grants for childcare centers to aid urban working women. However, the biggest failure of this budget lies in the fact that it is silent about malnutrition amongst women and children. the share of children between ages of 6 to 59 months facing anemia in Karnataka has increased from 60.9% to 65.5% between 2015-16 and 2019-20. Similarly, the share of women between ages 15 and 49 in Karnataka facing anemia in Karnataka has increased 2015-16 and 2019-20 from 44.8% t0 47.8%. (Source: National Family Health Survey – Round 4: 2015-16 and Round 5: 2019-20, Karnataka). The survey for 2019-20 was conducted before the Covid-19 pandemic. Thereby it is expected to have increased much more now. The Chief Minister has not made a mention of it, for the sake of courtesy. Then, is it possible to claim that the budget has provided for gender justice?

Lastly, which class faced the highest difficulty because of the Covid-19 pandemic? It is very well established now that it has been the migrant workers. Unemployment rates have been at a 40-year high. There exists no programme in the budget to create jobs. It is true that the budget might have some positive yet unintended impacts. However, today we are in a real crisis for which programmes that would have created jobs and increased capital investments should have been emphasized.

There existed a need to strengthen Annabhagya and other food security schemes. Public health and public education must have been emphasized. The grants provided to the (dominant) caste associations must have been diverted to these causes and schemes. These are the programmes that would aid the very last classes in the economy. Rightly noted by Prajavani, this budget is ‘Only Showcase: (All about) Loan Plays’ or Bari Nota: (Ellavu) Saalada Aata.

Registration charges for the purchase of flats between Rs. 35 to Rs.45 lakhs has been reduced from 5% to 3%. There’s no way but to call it a budget of the haves. What form of public economics management is it to charges for haves when the economy is in an extreme financial crunch. The media has been rallying that it is a ‘taxless budget’. It must be noted that GST has taken away the powers of the state to levy taxes. Today, states do not have the powers to levy taxes or increase their tax rates.

In totality, this budget seems to be an attempt to build castles in the air.

The article was first published in Gauri media’s Kannada weekly magazine Nyayapatha and translated in english by Shashank SR.


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April 2024



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