Karnataka Govt’s Five Guarantee Schemes Blamed For Rising Fiscal Deficit, Debt and Subsidy Burden: CAG

Bengaluru: The Congress government in Karnataka may be riding high in popularity over its `guarantee schemes'. However, the same bouquet of schemes is dragging down its economy.

CAG warns guarantee schemes may strain Karnataka’s finances

The issue has been made pretty clear by the Comptroller and Auditor General (CAG), which has warned the Karnataka government that the implementation of the give guarantee schemes without rationalising the existing subsidies will exert pressure on the state's resources and impact fiscal deficits and debt levels.

The CAG report for the year ending on March 31, 2024, which was the first CAG report after the Congress government implemented five guarantees -- Gruha Lakshmi, Gruha Jyoti, Anna Bhagya, Shakti and Yuva Nidhi, with a budget provision of Rs 36,538 crore was tabled in the monsoon session of the Legislative Assembly.

The CAG pointed out that the `guarantee' schemes accounted for 15% of the revenue expenditure in 2023-24. ``While the state's revenue grew by 1.86% during this period, its expenditure grew by 12.54%. The increase in the growth expenditure was mainly on account of the `guarantee' schemes which was contributing factor of revenue deficit to the tune of Rs 9271 crore. The mismatch of receipt and expenditure resulted in state witnessing revenue deficit after its recovery during 2022-23 from Covid-19,'' the CAG noted.

Karnataka’s fiscal deficit jumps to ₹65,522 crore

Noting that the state fiscal deficit also rose from Rs 46,623 crore in 2022-23 to Rs 65,522 crore in 2023-24, the CAT stated that the state, to finance the `guarantee' schemes and the deficits arising thereof, availed net market borrowing of Rs 63,000 crore, which was Rs 37,000 crore more than the previous year. ``This would only increase repayment burden in the near future, along with increase in the interest burden,'' the CAG warned.

Pointing out that the capital expenditure towards infrastructure dropped by Rs 5229 crore, the CAG said that this would result in increase in incomplete projects by 68%. ``This compression in gross capital formation may prove to be detrimental to future growth prospectus,'' CAG warned.

``Three of the `guarantee' schemes -- Gruha Jyoti, Anna Bhagya and Shakti were in the form of subsidies. As a result, the state subsidy burden got pushed up to Rs 60,774 crore,'' CAG added.