If the Congress needed to demonstrate that the guarantees it offered in the elections last year were a part of its longer-term strategy for Karnataka, Chief Minister Siddaramaiah’s Budget does so quite unequivocally. Instead of just trying to squeeze out funds for the guarantees promised at that time, he has added fresh welfare measures, including 430 free medical laboratories to be set up in Bengaluru. And the Budget reflects a financial thinking that would, if it works, make the guarantee-led model financially sustainable.
The radical part of this strategy lies in its approach to the revenue deficit. Conventional wisdom has it that the government should strive for a surplus on the revenue account that would help finance capital expenditure. The Budget breaks out of this thinking with the Chief Minister stating that a revenue surplus is meaningless if the State cannot aid the poor and the needy in times of distress. He has gone on to concretise this approach with a budgeted revenue deficit of ₹27,354 crore, nearly 1% of Karnataka’s GSDP. At the same time, he has made it clear that this is not a sign of fiscal profligacy. He has kept the fiscal deficit at 2.95% of GSDP, which is below the level mandated by the Karnataka Fiscal Responsibility Act, 2022.
A strategy that allows the revenue deficit to increase while keeping the overall fiscal deficit in control puts pressure on capital expenditure. The Chief Minister hopes to ease this pressure by mobilising private capital through a variety of measures. The Budget makes all the usual noises about foreign investment, including a Global Investors Meet, but what is worth watching are the innovative steps it takes on mobilising domestic capital.
