Karnataka’s outstanding debts are at a staggering Rs 5.53 lakh crore. This could touch Rs 7.24 lakh crore by 2026-27, according to the 2023 medium-term fiscal plan (MTFP). In the current fiscal, Karnataka is estimated to pay Rs 34,000 crore towards interest payments.

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The state’s borrowings include loans from the open market, financial institutions, National Small Saving Fund (NSSF) and the union government.

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But, Chief Minister Siddaramaiah who also holds the finance portfolio, dismisses the state falling into a debt trap as 'far from the truth' and claims that the state is run, under strict financial discipline. "Ours is a robust economy and the tax collection has been very good. We know how to manage the finance better than the BJP-led NDA Government in the Centre".

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The ruling Congress members have given a thumbs up to the no new tax budget presented by the CM last week, despite being aware of the fact that their government had hiked the excise cess twice and also stamps and registration cess in the last eight months to mop up the resources to continue the five guarantees which guzzle around Rs 52,000 crore every year . In the current fiscal, the state government had to spend around Rs 32,000 crore on guarantee schemes. Around Rs 28000 crore goes towards the Gruha Lakshmi scheme of giving Rs 2,000 per month to each woman towards the empowerment of women in the State.

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The next burden would be distributing money of Rs 15 per kg of rice  to 1.20 crore BPL families as the Government of India refused to sell the rice at a subsidised rate to Karnataka, which would cost another staggering Rs 7500 crore.  Other guarantees such as free power up to 200 units, free bus ride for women in KSRTC buses from anywhere to anywhere, and monthly unemployment allowance to the degree and diploma students comes to around Rs 15000 crore. To manage Rs 52,000 for five guarantees, the CM has done a lot of juggling to ensure the funds for these schemes continue to flow, at least till the Lok Sabha polls to be held in next two to three months.

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More announcements but no funds

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To make the budget attractive, Siddaramaiah has announced a number of new schemes but without any financial allocation. The three major irrigation projects, Mahadayi, Mekedatu and Yettinahole have failed to get the required funds to show any real progress. The Congress Party led by KPCC President D.K.Shivakumar, that took out a padayatra from Kanakapura taluk up to Bengaluru amidst the Covid pandemic, has not progressed an inch. This is despite Shivakumar 's tall claims they will start the project if the Congress Party was voted to power.

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The electorate did give the Congress a whopping 135 seats, well beyond the expectations of the party leaders. Even the Bengaluru related projects have not received any importance except Rs 500 crore for the white topping and a couple of crores for the much-hyped underground tunnel road to address the existing traffic chaos. Not much has been allocated for the sixth stage of the Cauvery drinking water scheme to meet the demand for water from Bengalureans. The 31 districts too have not benefited much from the budget as the majority of resources goes towards guarantees.

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Budget without development

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Former Chief Minister Basavaraj Bommai termed the budget as a document without funds for development.  “This sacred document had been used as a tool to attack the central government for not giving what’s due to Karnataka just to create the impression that the Modi Government had been doing injustice to the State”, he said. In contrary, the funds from the central government had been more than what was released by the previous Congress-led UPA Government, he said.

“CM Siddaramaiah had upped the ante against Prime Minister Narendra Modi following his inability to manage Rs 55000 crore every year for the freebies. There has been no development in the last eight months as the funds had been diverted for the implementation of schemes. The core sectors like water resources, education, agriculture, social welfare and heath had been totally neglected.  With this budget, the overall development of the State was not possible, “ he added.

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Bommai, who had presented two budgets as the CM with finance portfolio, warned that Karnataka was inching towards the debt trap as the state government was intent on implementing five guarantees for the next five years as promised to the people during the Assembly polls last year. With Rs 55000 crore going  towards five guarantees where was the money left for other development works? The CM, in spite of knowing the state' s finance position, had been making promises involving crores of rupees. The funds allocated for various departments were sufficient only for the salary and perks of the government employees but not for development works.  The state would face serious consequences in case of recession in the coming months.

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The excise duty on certain types of liquor like beer had been hiked twice in the last eight months and the people would go to neighbouring states like Goa or Maharashtra to satuate their addiction as the cost of certain types of liquor has been very less. The CM has set an ambitious target of Rs 32000 crore from the excise department to pool the resources for guarantee schemes. In case of people crossing the state borders to consume liquor it would be a big loss to the state treasury.

Siddaramaiah’s short term fix with this budget is going to damage Karnataka in the long term, say his opponents.

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