How long do we wait for Karnataka’s dream Budget?

This Budget, like several that have come before it, lacks any vision to truly chart a new course for State’s development

The State’s fiscal crisis has not been turned into opportunity for, say, modernising property tax collection systems to make cities self-sufficient .

This is a difficult year for Karnataka. Between falling grants from the Finance Commission and stagnating GST revenues, Karnataka’s ₹2.37 lakh crore Budget is nearly about the same size as last year’s. The Chief Minister was not wrong in saying that Karnataka is in a financial crisis, and indeed this is a question that needs to resonate in all our minds.

We rightfully hold the government of India to account on its Budget, on the achievement of various national development goals, on job creation and on the growth of the economy. It’s time we started doing the same with our State governments as well.

Expense per person

Even with a Budget that has stayed the same in size, the government of Karnataka plans to spend ₹33,700 per person in the State. In comparison, the government of India has budgeted only ₹22,000 rupees per person. Once you exclude defence and other expenditures that are distant to most people’s lives, it becomes evident that a more prosperous State such as Karnataka is very much in charge of its own future. Between the GST and Union taxes, the State may not have full control over its revenues, but does have overwhelming control over its expenditure.

While most of our attention goes towards national missions with heavy marketing, the bulk of expenditure on cities, health, education and more come from State’s own schemes. For example, this year the State has budgeted ₹10,294 crore on health — a healthy increase of 6% at a time when the Budget has not grown. Out of this, Ayushman Bharat, National Health Mission, and all other Union government schemes constitute less than ₹3,000 crore. The remaining funds are left to the imagination and the policymaking prowess of State leaders.

Unfortunately, leadership is often squandered at the State level. This Budget, like several that have come before it, lacks any vision to truly chart a new course for the State’s development. Karnataka was a pioneer in decentralisation in the 1980s, urban governance reforms in the late 1990s and 2000s, and in the last few years, a leader in reforming and modernising agricultural markets. The State’s fiscal crisis has not been turned into opportunity — for accelerating the privatisation of ailing State PSUs, for unlocking new sources of revenue, for modernising property tax collection systems to make cities self-sufficient, or a whole host of other reforms.

One can argue that these are policy matters, and the Budget is a mere presentation of its accounts. But in India, not only do new policies get announced alongside the Budget numbers, but the budgets reveal the true priorities of governments.

Hyperpolarisation

The 2020 Budget also appears to have fallen victim to the hyperpolarisation of the State’s politics. On subjects such as agricultural market reforms, Karnataka saw policy continuity across different governments in the early 2010s. Now, we see a new plan for Bengaluru with every Budget, with ideas such as Mattondu Cauvery being shelved before even taking off, and new clones and variants of older projects being announced.

As Karnataka struggles to balance its Budget this year, it’s also important to ask how well the State did when it had sufficient resources. Through the last decade and more, the State has managed its finances well, with a limited fiscal deficit and a revenue surplus in most years. Researchers Jacob and Chakraborthy at NIPFP found that the State managed to do so by compressing its expenditure on education, nutrition, energy, and transport over the last decade. Overall, a higher priority was given to rural development and agriculture — and the outcomes of that expenditure do not match the priority. Not much has changed with this year’s Budget. This is in spite of drop-out rates and learning outcomes being worse in Karnataka’s schools than in comparable neighbours.

In 2020, a State such as Karnataka has no excuse in not building up its leadership, its policymaking talent, and the ability to come up with 21st century solutions to its challenges. If not this year, then next year Karnataka will be a $250 billion economy. We need governance, leadership, and budgets that can transform Karnataka into a trillion dollar economy by 2030, and one that doesn’t leave people behind.

(Pavan Srinath is a policy researcher and hosts the Thale-Harate Kannada Podcast and The Pragati Podcast.)