Revised methodology adopted by the Central Statistical Organisation (CSO) in measuring the Gross State Domestic Product (GSDP) of the State is likely to reduce Karnataka’s open market borrowings (OMB) capacity during 2015–16.
The borrowing capacity of the State depends on its GDP. Chief Minister Siddaramaiah has said the State’s borrowing capacity has been underestimated substantially owing to revised methodology adopted by the CSO.
The CSO estimated the gross value added of the information technology sector in the State at 15 to 16 per cent while the share of software exports is around 33 to 35 per cent.
“The revised methodology has grossly undervalued the contribution of the IT sector in Karnataka,” Mr. Siddaramaiah said while presenting the budget on Friday. To fund development projects, the government has been relying on the OMB over the years. The State is expected to raise Rs. 17,101.54 crore from the OMB during 2015–16 against Rs. 16,733.71 crore in 2015–16. The State was relying on the OMB owing to low interest rate (6 to 7 per cent) against Central loans that charges 7.5 to 9 per cent interest.
In the composition of public debt, the State’s OMB increased from 48 per cent (Rs. 32,064 crore) in 2011–12 to 63 per cent in 2014–15 (Rs. 73,703 crore). The share of National Small Savings Fund (NSSF) in outstanding liabilities has been on the decline, from 30 per cent in 2011–12 to 20 per cent in 2014–15, according to the State’s Medium Term Fiscal Plan (MTFP-2015–19).
The 14th Finance Commission has recommended that States be excluded from the operations of the NSSF from April 1, 2015. The commission has said that involvement of the States in the NSSF scheme with effect from next financial year would be limited solely to discharging the debt obligations already incurred by them until that date.
Loans from financial institutions, mostly from LIC, GIC and NABARD, also declined from 5 per cent of the gross public debt in 2011–12 to 4 per cent 2014–15. The share of loans from the Centre declined from 17 per cent to 13 per cent during the same period.
