The Hindu : Karnataka / Bangalore News : From where will the funds come?

Online edition of India's National Newspaper
Friday, Jul 18, 2008
ePaper | Mobile/PDA Version

Karnataka

Karnataka - Bangalore

From where will the funds come?

V. Sridhar

There are fears that if the revenues fail to materialise, the schemes may be hit

Bangalore: The State Budget for 2008-09 has broadly conformed to expectations that it would keep the promises made by the party. However, fears about the budget centre around three sets of factors.

First, there is the fear that it smacks of tokenism – a little bit for many sections of the common people, but lacking in a serious thrust which addresses the underlying problems plaguing the economy.

Soon after presenting the budget, Chief Minister B.S. Yeddyurappa said: “the budget addresses 90 to 95 per cent of the promises we made to the people”, and took pride in presenting a “farmer-oriented budget”.

He has, of course, delivered on the promise of free power to farmers. In addition, he has offered Rs. 1,000 to every small and marginal farmer totally dependent on dry-land cultivation.

There is also the assistance of Rs. 2,000 to farmers to support organic farming methods. However, the point is that all these measures and more are completely inadequate in the context of the massive agrarian distress that stalks Karnataka.

The second disturbing feature of the budget pertains to way finances have been secured for the outlays.

Amidst the glare of publicity that was focused on the “populist” schemes, a fundamental question about how funds have been mobilised to meet the apparently increased allocations was somehow lost sight of.

There are only a few areas in which taxes have been raised — the higher rates of taxation on motor vehicles being a major one. So, where are the funds for all the new and expanded welfare schemes to come from?

Loans

It turns out that Karnataka is relying significantly more on loans from the “open market” in 2008-09.

The Capital Receipts side of the budget, which often does not attract media scrutiny, shows that in 2007-08 the Government actually paid back loans it had secured from open market sources to the tune of Rs. 465 crore.

In 2008-09, the situation is not only going to be completely reversed but open market borrowings are projected to shoot up to almost Rs. 3,200 crore.

That this is happening at a time when interest rates are hardening significantly points to the risks associated with the Government strategy of using costly funds to pay for a thinly spread welfare programme.

Options

Speaking to The Hindu, a senior government official said the Government’s options for borrowing from other sources such as the Public Account (in which Provident Fund contributions are a significant component) were rather limited.

The third problematic feature of the budget pertains to its rather ambitious projections relating to revenue mobilisation.

Growth

Tax revenues are projected to increase by 17 per cent. In a situation in which there is a general consensus that growth will slacken significantly and one in which inflation is still peaking, there are fears that if the revenues fail to materialise it may hit the many schemes that have been rolled out.

Printer friendly page
Send this article to Friends by E-Mail

Karnataka