Congress President Mallikarjun Khage’s advice to state units has become the latest flash point between the party and the BJP. It started when Hager, 82, suggested that congressional units commit to financially “viable” guarantees. Seize the opportunity, Prime Minister Narendra Modi launches scathing attackdenounced the old party’s “unrealistic promises” and invited Hager’s ‘cheap PR stunt’ Responses to the NDA 100-day plan.
Karnataka Chief Minister Siddaramaiah and deputy DK Shivakumar also accused the Prime Minister of making false accusations and copying their model. “Who says we are facing financial problems? Our financial strength is greater than the strength of the country,” Shivakumar told reporters on Saturday.
Karnataka has for months accused the NDA-led Center of ignoring the state’s concerns. The state reportedly sent a delegation to meet Union Finance Minister Nirmala Sitharaman during pre-budget discussions and requested Rs 5,400 crore as per the recommendations of the 15th Finance Commission. Later, in July, Siddaramaiah skipped the NITI Aayog Governing Council meeting chaired by Prime Minister Modi in Delhi. He said at the time that despite his “serious efforts” to get MPs from all parties to meet in the capital to discuss the southern state’s finances, this had been ignored in the budget.
“We feel that the voice of Kannadigas is not being heard and therefore there is no point in participating in the NITI Aayog meeting,” the Karnataka Chief Minister said at the time.
However, the financial pressure from Congress’s ambitious welfare schemes is becoming increasingly evident in Karnataka. Siddaramaiah had championed the program as the centerpiece of his government’s social agenda but now faces tough economic realities. His economic adviser Basavaraj Rayareddi had earlier expressed concern that the state’s annual budget – which has an estimated Rs 60,000 crore for five key welfare guarantees – was limiting basic development works funds.
Let’s take a look at how Karnataka has performed in recent years and what’s ahead.
Economic growth in Karnataka slows down, below national average
Karnataka’s real GDP has been above the national average since 2019-20 and is expected to be below the national average in 2023-24. Karnataka’s gross domestic product (GDP) growth is 7.3% and is expected to grow at 6.6%.
The state’s fiscal deficit is also rising. In 2022-23, the deficit will be 2.14% of GDP and increase to 2.67% in 2023-24. It is estimated that this proportion will reach 2.95% in 2024-25.
Tax revenue falls, central subsidies decline
In 2021-22, Karnataka’s tax revenue accounted for 7.54% of GDP, but it fell to 6.24% in 2023-24. The center’s allocation also fell during the same period, from 1.22% to 0.55%, according to the state budget.
The Karnataka Economic Survey 2023-24 shows a decline in central tax collection from 2.55 per cent in 2018-19 to 1.45 per cent in 2023-24.
“A similar trend is expected when we look at the Centre’s grantmaking, which has declined from 1.05% in 2018-19 to 0.51% in 2023-24,” the survey added.
Liabilities are expected to increase
While liabilities remain under control, they are expected to increase. The debt-to-GDP ratio is expected to increase from 22.6% in 2023-24 to 23.77% in 2025-26 and 23.97% in 2027-28.
Foreign investment falls
Foreign investors prefer Gujarat over Karnataka.
According to the Ministry of Industry and Internal Trade Promotion, Karnataka received foreign direct investment (FDI) of $22 billion in 2021-22, which fell to $10.4 billion in 2022-23 and to $10.4 billion in 2023-24. It fell further to US$6.57 billion.
