COVID impact: Karnataka Budget numbers likely to be revised
More funds may be set aside for healthcare expenditure
With the second wave of COVID-19 having an unprecedented impact on public finances, the State Budget numbers are likely to undergo revisions for the second consecutive year as more funds will have to be set aside for expenditure in the health sector and for subsidised distribution of food.
Owing to a month-long lockdown (April 27 to May 24) and reduced economic activity earlier, the State’s revenue receipts are expected to slow down at least in the first quarter of 2021-22. While the receipts are expected to be down, the Opposition Congress and the small scale-industries’ association (KASSIA) have been mounting pressure on the government to announce a financial package for those impacted by the lockdown.
Though the Finance Department is yet to assess the impact of the slowdown in tax collection, it is a fact that receipts of all major revenue-generating sources such as stamps and registration, motor vehicles, and excise have taken a severe beating, government sources said.
Earlier this year, Chief Minister B.S. Yediyurappa, who also holds the Finance portfolio, presented a Budget of ₹2,46,207 crore — an increase of ₹8,314 crore (3.5%) over the previous year — without levying new taxes or increasing existing ones.
Funds have been released to zilla and taluk panchayats for meeting the expenditure for the first five months of 2021-22. With the likely shortage of revenue, the government has refrained from issuing orders and releasing funds for new schemes.
“Fighting COVID-19 will be given the utmost priority,” the Chief Minister has said on many occasions. A sum of ₹700 crore has been released for the purchase of two crore doses of vaccines, and expenditure has been incurred for the supply of oxygen, establishment of ventilators, ICU beds, and COVID Care Centres during this health crisis, sources said.
The sources maintained that the impact of COVID-19 on the State’s finances would be known by the end of June, depending on the ground situation. The State had decided to limit borrowings to 4% of the Gross State Domestic Product in 2021-22, as against 5% in 2020-21.
Economists said the deadly second wave of COVID-19 has brought to an abrupt halt economic recovery, particularly in the services sector, including travel, tourism, and hospitality. These sectors are unlikely to recover in the next few months, they said.
The manufacturing sector too has been adversely impacted, both from the demand and supply sides, an industrialist said. Only the farm sector has not been affected much. The forecast of near-normal Southwest Monsoon for 2021 by the IMD brightens the hope for better Kharif output in the current year, an official in the Agriculture Department said.