Freebies first, development later? Karnataka cuts programs to fund welfare schemes, CAG flags deficit risks | India News
Siddaramaiah with DKS (File photo)
New Delhi: The Karnataka government’s rising expenditure on welfare schemes has put pressure on its finances, forcing cuts in some ongoing programmes, the Comptroller and Auditor General (CAG) said in its report for the fiscal year 2024-25 tabled in the Assembly on Thursday.
Guarantee schemes cost significant revenue
The CAG noted that the state has spent Rs 52,525 crore in 2024-25 on five guarantee schemes – Shakti, Griha Lakshmi, Griha Jyoti, Yuva Nidhi and Anna Bhagya. The report states that it accounts for about 20% of revenue receipts and 27% of the state’s own revenue, highlighting the schemes’ heavy burden on the budget.“Though revenue growth is stable, it is insufficient to absorb the recurrent expenditure of the guarantee schemes and hence the state has to rely on borrowing to finance the guarantee schemes,” the report said. By 2024-25, while the state’s revenue has grown by 10.63%, its expenditure has grown by 14.99%, largely due to guarantee schemes.
Cut other programs and growing debt
The CAG highlighted that rising subsidies have forced the government to cut funding for some ongoing programmes, including nutrition, support to local bodies, village panchayats in rural development programs and urban development initiatives.The mismatch between receipts and expenditure contributed to a fiscal deficit of Rs 20,834 crore, while the fiscal deficit widened from Rs 65,522 crore in 2023-24 to Rs 85,030 crore in 2024-25, news agency PTI reported. To cover the gap, the state borrowed a net market of Rs 71,525.15 crore, which was Rs 8,525.15 crore more than the previous year.
Concerns about capital expenditure and debt servicing
While overall capital expenditure rose by Rs 5,786 crore, the report said actual investment in infrastructure grew by only Rs 3,284 crore after adjusting for central assistance, disinvestment and off-budget borrowing. The CAG warned that “this contraction in gross capital formation may prove detrimental to future growth prospects.”It also noted that higher borrowing would increase debt service obligations, which could increase spending on developmental, infrastructure and welfare measures. The report warned that continued debt growth could breach the Karnataka Fiscal Responsibility Act (KFRA) fiscal targets.
