Karnataka presents third surplus budget
New government benefits from sound fiscal management of earlier regime
| If the state government is able to eventually carry it through, this will be the third year in a row of surplus budgets for Karnataka. |
| The revised estimates for 2004-05, presented by the then deputy chief minister and finance minister, Siddaramaiah, last March clocked an overall budgetary surplus of Rs 60 crore. This is set to be followed by a surplus of Rs 29 crore (revised estimates) for the present year and a projected surplus of Rs 27 crore for 2006-07. |
| In consequence, the state is firmly on track in terms of the goals it has set for itself for yearly fiscal correction in the Karnataka Fiscal Responsibility Act. Fiscal deficit to state domestic product in 2005-06 is set to reach 2.84 per cent and is projected to go down marginally to 2.82 per cent in 2006-07. |
| Fiscal experts in the state appear to give the credit for this to Siddaramaiah. The new finance minister, who has been in office for less than two months, is able to please everybody by reaping the benefits of the policies sowed by the previous finance minister. |
| The fiscal position has improved over the last two years at the outset because of 8 per cent-plus growth in the state's income (state domestic product), enabled by successive good monsoons. This was built upon by the strong tax effort of Siddaramaiah. He initiated a excise duty regime for the state's liquor industry, which in the present year, is likely to see excise duty collection go up by a massive 35 per cent. Commercial tax collection is set to go up by 18 per cent. |
| Overall, revenue from the state's own taxes is slated to go up by 21 per cent in the present year to Rs 19,505 crore (revised estimates), compared to Rs 1.6072 crore (actuals) in 2004-05. The budget projects another rise of a similar magnitude, 20 per cent in 2006-07 for the state's own tax earnings to reach Rs 22,534 crore. |
| The stars are shining for the state on account of the Centre also whose own revenues are buoyant because of the overall economic growth in the country. The budget projects the state's share of central taxes to go up by 24 per cent to Rs 4,609 crore and central grants by a massive 76 per cent. The latter is the result of the implementation of the recommendations of the Twelfth Finance Commission (Rs 800 crore). In 2005-06, the state earned from the Centre Rs 65 crore for being a good boy fiscally and Rs 309 crore through consolidation of central loans. |
| The only new taxes the state budget has levied are on liquor which will net an additional Rs 300 crore. This is likely to raise the consumer's liquor bill by 5 per cent. The government, however, denies it has levied any fresh taxes and only "rationalised" and reduced the number of rates. |
| On the other hand, the state has lowered the stamp duty by 0.5 per cent from the present 8 per cent. As the state will revise property valuation guidelines to capture the present boom in property prices, the exchequer is likely to earn more despite the cut in stamp duty. |
| The resource position of the state has been so comfortable that it has not had to take recourse to the balances in the public accounts. Hence, the capital account shows net support from the public accounts in the 2005-06 revised estimates at minus Rs 1,181 crore. Consequently, for the next year the government has projected a negative open market loans mobilisation of Rs 234 crore. That is, it will repay that much more than it will borrow afresh. |