Chief minister Siddaramaiah appears increasingly dependent on loans to finance welfare schemes, including his party’s five guarantees and development projects, a shift in strategy that reflects a recognition of limited opportunities to expand tax revenue in the 2024-25 fiscal.
Siddaramaiah, who presented a Rs 3.7 lakh crore budget, intends to borrow over Rs 1 lakh crore, a notable increase from the Rs 85,818 crore he had pencilled in for loans in the previous 2023-24 fiscal.
Consequently, total liability of the govt will rise to Rs 6.6 lakh crore, with the burden of servicing debt touching a staggering Rs 86,068 crore, including interest payments of approximately Rs 40,000 crore. It is a marked increase from interest payments of Rs 34,027 crore projected for 2023-24.
However, the decision to borrow more comes amid a forecast of robust growth. Gross state domestic product (GSDP) is projected to reach Rs 28.6 lakh crore, up from Rs 25.7 lakh crore previously. In any case, the state is not pushing the limit on borrowings. Fiscal Responsibility and Budget Management rules state the govt’s total liability should not exceed 25% of GSDP. Presently, the liability stands at Rs 5.7 lakh crore and the govt can borrow up to Rs 1,40,000 crore to remain within the prescribed limit. However, caution seems the better part of recklessness and Siddaramaiah has opted to stay well below this threshold.
“We have maintained fiscal prudence. The borrowing is justified as funds will be allocated for welfare and development in a balanced manner,” said Basavaraj Rayareddi, economic advisor to the chief minister.
While tax revenue has been robust, collections haven’t matched expectations. Except for commercial tax, targets for all other departments have largely stayed unchanged. The target for com mercial taxes has been revised upward from Rs 1 lakh crore to Rs 1.1 lakh crore.
The state’s own tax revenue is projected at Rs 1.9 lakh crore, compared to Rs 1.7 lakh crore estimated for the 2023-24 fiscal. But despite a 13% increase in tax revenue, govt departments have struggled to meet ambitious targets, prompting Siddaramaiah to set comparatively modest goals for 2024-25.
However, experts have criticised Siddaramaiah’s approach, suggesting he should have prioritised increasing non-tax revenue instead. Non-tax revenue is estimated to reach Rs 13,499 crore, up from Rs 12,000 crore in the previous budget.
“It is disappointing that the govt has not placed more emphasis on bolstering nontax revenue. By tapping into this readily available source, the chief minister could have reduced the state’s debt burden,” said BV Madhusudan Rao, senior research adviser, Centre for Budget and Policy Studies. “There is concern that majority of borrowing is from open market loans, while capital expenditure, especially on development, has seen minimal increase.”
Opposition leader R Ashoka slammed the proposal, saying: “The annual interest burden on the state shot up from Rs 8,500 crore to Rs 16,208 crore leaving a debt burden of Rs 44,000 on every citizen.”
Siddaramaiah, who presented a Rs 3.7 lakh crore budget, intends to borrow over Rs 1 lakh crore, a notable increase from the Rs 85,818 crore he had pencilled in for loans in the previous 2023-24 fiscal.
Consequently, total liability of the govt will rise to Rs 6.6 lakh crore, with the burden of servicing debt touching a staggering Rs 86,068 crore, including interest payments of approximately Rs 40,000 crore. It is a marked increase from interest payments of Rs 34,027 crore projected for 2023-24.
However, the decision to borrow more comes amid a forecast of robust growth. Gross state domestic product (GSDP) is projected to reach Rs 28.6 lakh crore, up from Rs 25.7 lakh crore previously. In any case, the state is not pushing the limit on borrowings. Fiscal Responsibility and Budget Management rules state the govt’s total liability should not exceed 25% of GSDP. Presently, the liability stands at Rs 5.7 lakh crore and the govt can borrow up to Rs 1,40,000 crore to remain within the prescribed limit. However, caution seems the better part of recklessness and Siddaramaiah has opted to stay well below this threshold.
“We have maintained fiscal prudence. The borrowing is justified as funds will be allocated for welfare and development in a balanced manner,” said Basavaraj Rayareddi, economic advisor to the chief minister.
While tax revenue has been robust, collections haven’t matched expectations. Except for commercial tax, targets for all other departments have largely stayed unchanged. The target for com mercial taxes has been revised upward from Rs 1 lakh crore to Rs 1.1 lakh crore.
The state’s own tax revenue is projected at Rs 1.9 lakh crore, compared to Rs 1.7 lakh crore estimated for the 2023-24 fiscal. But despite a 13% increase in tax revenue, govt departments have struggled to meet ambitious targets, prompting Siddaramaiah to set comparatively modest goals for 2024-25.
However, experts have criticised Siddaramaiah’s approach, suggesting he should have prioritised increasing non-tax revenue instead. Non-tax revenue is estimated to reach Rs 13,499 crore, up from Rs 12,000 crore in the previous budget.
“It is disappointing that the govt has not placed more emphasis on bolstering nontax revenue. By tapping into this readily available source, the chief minister could have reduced the state’s debt burden,” said BV Madhusudan Rao, senior research adviser, Centre for Budget and Policy Studies. “There is concern that majority of borrowing is from open market loans, while capital expenditure, especially on development, has seen minimal increase.”
Opposition leader R Ashoka slammed the proposal, saying: “The annual interest burden on the state shot up from Rs 8,500 crore to Rs 16,208 crore leaving a debt burden of Rs 44,000 on every citizen.”