For all the fuss Chief Minister H.D. Kumaraswamy made about presenting a full budget and not a supplementary one, his exercise is essentially one of ‘Siddaramaiah plus farm loan waiver’. The substantial priorities of the budget are quite the same as those of the previous one, with a clear endorsement of the same welfare schemes and economic strategy. There is emphasis on new industrial centres away from Bengaluru and assorted schemes for dryland agriculture.
Where the budget has had to be different is in the size of farm loan waiver. Having been brought to power, or at least close enough to power to go the rest of the way with the support of the Congress, by the pro-farmer image of his father and his party, Mr. Kumaraswamy could not brush aside his poll promise. His waiver of ₹34,000 crore worth of farm loans is not the entire amount he had promised, but is substantial enough to keep his constituency quiet. Even here though, the final number includes the ₹4000-crore waiver that was promised by his predecessor.
What is interesting is the way Mr. Kumaraswamy has found the resources for this splurge. He has first reduced the immediate burden on the budget by clarifying later that the waiver would be done over four years. All that will be done immediately is giving the farmers the paperwork they need to ensure banks do not take their arrears into account when deciding their future loans. The actual waiver can then be staggered, bringing the burden down to a fourth of the entire largesse.
This immediate burden too is to be met, at least in part, by the Centre. This budget expects the compensation from the Centre for GST shortfall to be more than ₹3000 crore greater than what the Siddaramaiah budget had estimated. What cannot be raised from the Centre is to be met by open market loans, which add up to ₹7,414 crore more than what the Siddaramaiah government had budgeted.
This will add to the already high interest burden Karnataka faces, but that is a matter for future governments to worry about.
The need to stay on the course laid out by the previous government extends to the predominantly administrative-cum-political manner in which the new industrial and urban centres have been planned. These centres have been distributed across districts that are politically significant, including Hassan and Mandya. There is some suggestion that there is an economic rationale to the choice of certain districts for individual industries, but it is far from a meaningful analysis of economic processes.
Little insight
The budget does present an interesting effort to camouflage the relative lack of insight into Karnataka’s economy by citing China’s success. China did have some success for a while by spreading the manufacture of components of final products into villages. But such an exercise calls for close links between manufacturing units and villages. The budget does not indicate just how these linkages are to be developed.
It would appear that somewhere along the way, there has been recognition that the budget may not be doing enough. There are thus a variety of universities and other initiatives promised. But they are all marked by stunningly low allocations, such as ₹3 crore for a tourism university.
The need to cover a wide ground with relatively insignificant allocations reflects the conditions in which this budget was prepared. The Chief Minister clearly did not have much time to develop an alternative approach to budgeting that would enable him to leave his mark on the State. And it shows.
(Narendar Pani is a professor at the National Institute of Advanced Studies, Bengaluru)
