The COVID-19 pandemic has cast a long shadow on the State's financial situation. While the Gross State Domestic Product (GSDP) for 2020-21 is estimated to contract by 2.6% compared to the previous year, Chief Minister B. S. Yediyurappa termed the preparation of the 2021-22 State budget “unprecedentedly difficult” and presented a revenue deficit budget, for the first time in recent times, in the Karnataka Assembly on Monday. The State budgets have always been revenue surplus in recent years. The revenue deficit for 2021-22 is estimated to be ₹15,134 crore.
Fiscal deficit and the total liabilities of the State are estimated to shoot up sharply by the end of 2021-22. Fiscal deficit is pegged at ₹ 59,240 crore – 3.48% of GSDP for 2021-22, even as brorrowings for the year has been pegged at ₹71, 332 crore. With this the total liability of the State at the end of 2021-22 is estimated to be ₹4,57,899 crore – 26.9% of GSDP. The government has announced that suitable amendments to the Karnataka Fiscal Responsibility Act, 2002, will be introduced in the current Assembly session. The budget commits to limit the fiscal deficit to 4%, despite the Union government relaxing it to 5% for 2020-21.
The Chief Minister explained that the COVID-19 pandemic had not only hit the State's economy, but will continue to pose challenges as well. “Though there are clear indications of green shoots in the economy, 2021-22 may also bring various kinds of challenges. The 14% expected growth we were considering year on year in revenue receipts will not be there during the next year. In a similar manner, the responsibilities taken to manage COVID-19 will have it own consequences in 2021-22,” the Chief Minister said.
Though the State had to revise the budget estimates for 2020-21, effectively contracting the budget to ₹2,29,925 crore from an earlier estimate of ₹2,33,134 crore, the budget estimates for 2021-22 is pegged at ₹2,46,207 crore that includes revenue expendinure of ₹1,87,405 crore, capital expenditure of ₹44,237 crore and debt repayment of ₹14,565 crore.
In 2020-21, the GSDP contracted by 2.6%. While the manufacturing and service sectors have recorded a contraction of 5.1% and 3.1% respectively, agriculture sector has recorded “remarkable” growth of 6.4%, despite the pandemic and recent floods in North Karnataka, the budget said. The Chief Minister also pointed out that the State ranked first in Niti Ayog's innovative index for two consecutive years, second in milk production, and fourth in sustainability index and public affairs. GSDP's share in the national GDP was 8% and is at 40% in software exports. “This is a ray of hope which has arisen in the post-Corona period,” the Chief Minister said.
