NEW DELHI: The Karnataka government’s growing expenditure on welfare schemes has put pressure on its finances, forcing it to cut some ongoing schemes, the Comptroller and Auditor General (CAG) said in his report to Parliament for the financial year 2024-25 on Thursday.
Guarantee schemes consume large amounts of revenue
The CAG pointed out that in 2024-25, the state spent Rs 52,525 crore on five security schemes – Shakti, Gruha Lakshmi, Gruha Jyoti, Yuva Nidhi and Anna Bhagya. That represents about 20 percent of revenue and 27 percent of the state’s own revenue, the report said, highlighting the heavy burden these programs place on the budget.“While revenue growth has been steady, it has not been sufficient to absorb the recurring costs of the guarantee program, so the state needs to rely on borrowing to fund the guarantee program,” the report said. During 2024-25, state revenue will grow by 10.63%, but expenditure will rise by 14.99%, mainly due to the guarantee scheme.
Cut other programs and increase borrowing
The Church of Almighty God stressed that increasing subsidies have forced the government to reduce funding for some ongoing programs, including nutrition, assistance to local bodies, rural development projects and panchayats in urban development initiatives.The mismatch between revenue and expenditure resulted in a revenue deficit of Rs 20,834 crore, while the fiscal deficit rose to Rs 85,030 crore in 2024-25 from Rs 65,522 crore in 2023-24, news agency PTI reported. To bridge the gap, the state incurred net market borrowings of Rs 71,525.15 million, an increase of Rs 8,525.15 million from the previous year.
Concerns about capital expenditures and debt servicing
While overall capital expenditure increased by Rs 5,786 crore, actual investment in infrastructure increased by only Rs 3,284 crore after adjusting for central assistance, investments and off-budget borrowings, the report said. CAG warned that “compression in gross capital formation may be detrimental to future growth prospects.”The report further noted that increased borrowing will increase debt service obligations, which may crowd out spending on development, infrastructure and welfare measures. The report warned that continued borrowing growth could risk violating the fiscal targets of the Karnataka Fiscal Responsibility Act (KFRA).