K'taka govt to spend Rs 52,000 cr schemes, retain fiscal deficit at 2.6%

The Siddaramaiah government has projected to spend around Rs 52,000 crore in the Congress five poll guarantees but even then it managed to retain the fiscal deficit at 2.6 per cent of the gross state domestic product (GSDP) for 2023-24, the same as was pegged by the previous Bommai government in the full budget for the current financial year.

The Congress government did this by raising excise duty on liquor, increasing the guidance value of properties, projecting more collections from the goods and services tax (GST) from the state component, cutting capital expenditure, and slashing revenue expenditure on heads other than five guarantees compared to the ones projected by the BJP government.

Besides, the new regime raised the projection of nominal GSDP growth to 17.7 per cent against seven per cent by the previous BJP government for the current financial year.

In his budget speech, Siddaramaiah said through five guarantees, in a year, approximately Rs. 52,000 crore will be spent and it is expected to reach about 13 million families. This means the government will be providing on average additional financial assistance of Rs. 4000 to Rs. 5000 monthly to each household, which is about Rs. 48,000 to Rs. 60,000 every year.

"This is done with the objective of providing a Universal Basic Income for our citizens. This is the first such initiative in the entire country," the Budget speech reads.

The five guarantees are 200 units of free power to all households (Gruha Jyoti), Rs 2,000 monthly assistance to the woman head of every family (Gruha Lakshmi), 10 kg of rice free to every member of a below poverty line (BPL) household (Anna Bhagya), Rs 3,000 every month for unemployed graduate youth and Rs 1,500 for unemployed diploma holders (YuvaNidhi) and free travel for women in public transport buses (Shakti).

To fund these schemes and yet retain fiscal prudence,  the Congress government raised the additional excise duty on alcohol by 20 per cent on all the 18 slabs of Indian-made liquor. The additional excise duty was raised to 185 per cent from 175 per cent.

Even then state excise would give the government Rs 36,000 crore,  just Rs 1,000 crore more than projected in the previous budget for 2023-24.

Revision in the guidance value of property would yield additional Rs 6,000 crore to total Rs 25,000 crore under the stamps and registration department  compared to the projections of Bommai Budget.  

Then, the state budget this time projected Rs 5,648 crore more from the state GST (SGST) to total Rs 76,150 crore for FY'24 against Rs 70,502 crore in the BJP government's budget.

Adding all this and netting with some tax concessions, the new Budget projected the state tax revenues to give Rs 11,000 crore to the exchequer at Rs 1,75,652.60 crore compared to the previous one.

With non-tax revenue also projected to yield Rs 1,500 crore more in the new budget compared to the BJP government's, revenue receipts would hand over Rs 12,500 crore to the government this time at a bit over Rs 2.38 trillion.

With capital receipts intact at Rs 250 crore,  the total receipts of the government are also pegged higher by Rs 12,500 crore at Rs 2.39 trillion.

However, this meant only less than one-fourth of the extra expenditure to be borne this year on five poll promises.

It is here that slashing of expenditure came to the aid of the government. As such, capital expenditure was cut by Rs 7,339 crore to Rs 50,988 crore this time.

Revenue expenditure was higher by only Rs 25,425 crore at Rs 2.51 trillion whereas it should have been more by Rs 52,000 crore compared to the Bommai Budget provisions. This meant revenue expenditure was cut on other heads.

As such, the total expenditure was higher by a bit over Rs 18,565 crore (Rs 25,425 crore- Rs 7,339 crore and adjusting for bit higher loan expenditure this time).

As such, Rs 6065 crore is roughly the additional expenditure that is not funded by higher receipts. This is the amount of the higher fiscal deficit at Rs 66,646 crore this time around.

However, the government also raised the assumption of nominal GSDP growth rate this time around. The Congress government's Budget assumed a 17.7 per cent growth rate in GSDP at current prices against seven per cent by the previous BJP government's Budget for the current financial year. The GSDP pegged by the new government stands at Rs 25.67 trillion for FY'24 against Rs 23.34 trillion assumed by the previous government. GSDP stood at Rs 21.81 trillion in 2022-23.

This enabled the government to retain a fiscal deficit at 2.6 per cent of GSDP. Had the GSDP growth been retained at 7 per cent, the fiscal deficit would have been a bit higher at 2.85 per cent of GSDP.

The moderate revenue surplus projected by the Bommai government at 0.02 per cent of GSDP will give way to a revenue deficit of 0.49 per cent this year now.