Karnataka's fiscal deficit soars on revenue shortfall

Karnataka chief minister B S Yeddyurappa has presented his third deficit Budget (for 2009-10), albeit a small one of Rs 85.9 crore, after three surplus budgets presented by himself, S M Krishna and Siddaramaiah.

However, the Centre’s suggestion that the statutory limit for fiscal deficit can be raised from 3 per cent to 3.5 per cent will allow the state to remain within the law despite a rise in the fiscal deficit to 3.49 per cent of the state’s gross domestic product in the revised estimate, compared with an initial budget estimate of 2.88 per cent of GSDP. The Budget estimate for 2009-10 projects an improvement of the fiscal deficit to 2.88 per cent.

The deterioration in the fiscal deficit for the year ending is on account of a large 9.3 per cent shortfall in revenue receipts in the revised estimates, compared with the Budget estimates. This is on account of a shortfall in both the state’s own tax revenue and its share of central taxes as the latter’s tax revenue has also similarly suffered.

This revenue shortfall from the targeted level has been partially made up by spending less. Revenue expenditure is down by 8 per cent in the revised estimate compared with the Budget estimate for 2008-09. The has likely been carried by the plan as there has been a sharp cutback in plan expenditure by 14.8 per cent from budgeted levels, when it was slated to go up by 46 per cent. This has not dimmed ambitions and in the coming year (2009-10) also plan expenditure is projected to go up 33 per cent.

Keeping in view the forthcoming Lok Sabha elections, Yeddyurappa said in the coming year, agriculture and allied activities, rural development, irrigation, power generation, roads, urban development and education will be the priority areas for the government. Also, while new taxes will fetch Rs 100 crore, giveaways will reduce the tax kitty by Rs 400 crore.

To address the infrastructure needs of Bangalore, the Budget has earmarked Rs 2,000 crore under a special programme to upgrade major roads through public-private partnership. Besides this, the Bangalore Development Authority (BDA) will spend Rs 800 crore.

Other programmes in the Budget include construction of 400,000 houses at a cost of Rs 1,200 crore for the poor. He also announced allocation of Rs 2,100 crore for free supply of power to farmers, around the same level as in the current year.