All eyes on state Budget

People in Karnataka will expect Chief Minister Basavaraj Bommai to come up with schemes in his Budget to be presented on March 4 enabling reopening of industries shut down during the last two years due to two crippling Covidinduced lockdowns. While this would occupy the top of the wish-list, they will also be looking for new employment-generation schemes. However, it would be natural for the Chief Minister to be a little populist as his government is entering its last year in office and there would be temptation to announce some sops to woo voters for the Assembly elections slated in MarchApril 2023.

Karnataka’s economy is not in the pink of health. While the Government is under pressure to spend more, it cannot afford to do so without additional borrowings thereby adding to its debt burden. The last two years were hard for the State as tax revenues dwindled thereby leading to jump in borrowings— from Rs. 50,459 crore in 2019-20 to Rs. 70,382 crore in 2020-21 and Rs. 71,332 crore in 2021-22 budget. Outstanding liabilities are nearing 27 per cent of the Gross State Domestic Product (GSDP). Mr Bommai’s announcement of new schemes—Raitha Vidyanidhi Scholarship for farmers; children, special grant for Bengaluru infrastructure etc—during the first six months of his tenure entail a cost of Rs 30,000 crore.

Distress caused by the pandemic is all-pervasive. Be it industry, hospitality, tourism, real estate, education, or transport, all have been hit hard. Rough estimates indicate that of the 80 lakh industrial employees in the State, around 30 to 40 lakh have lost jobs. Nearly onethird MSME units have shut down. FKCCI estimates put the loss to business and trade at Rs. 75,000 crore during the last two lockdowns. With the invasion of Ukraine, a hike in fuel prices cannot be ruled out.

The MSME sector hinges its hopes on interest subsidy or interest subvention to the tune of at least 4 per cent in order to revive the sector. It is also urged that the Centre should offer grant rather than loan for it Gati Shakti initiative, lest the States get ensnared in a debt-trap. Though state industries have pleaded for reduction of state excise duty on petrol from 30 to 15 per cent, it does not seem to be within the realm of possibly for a cash-strapped government. His response to bring down the power tax from 9 per cent to 3 per cent too would be awaited. Some waiver of property tax too is avidly awaited in order to expedite the momentum in realty sector. A plea has been made to come up with housing units for the migrant labourers too.

It is hoped Bommai strikes a balance between stimuli required for revival of the economy and the realpolitik concerns because of the state elections.