Chief Minister Siddaramaiah lamented that despite Karnataka’s proven track record of sound fiscal performance, it is not receiving any incentives for its fiscal efficiency. He said this after inaugurating the national-level seminar on ‘Fiscal Federalism: Challenges Before the Sixteenth Finance Commission’, organised by M.S. Ramaiah University of Applied Sciences in the city on Saturday.
Mr. Siddaramaiah emphasised that Karnataka’s macro-fiscal performance has been noteworthy with the distinction of being the first State to promulgate the Fiscal Responsibility Act. The macro-fiscal indicators such as fiscal deficit and revenue deficit have always been within the stipulated limits, barring the post-COVID-19 pandemic reappearances of revenue deficits, he said.
The Chief Minister said the State does not have adequate resources to attain the vision of $1 trillion GSDP by 2032. “Furtherance of the State’s economic and human development requires significant investments in human and physical infrastructure. Despite Karnataka’s proven track record of very sound own tax performance, the resources are not adequate to meet the growing challenges and also attain the vision of $1 trillion GSDP by 2032,” Mr. Siddaramaiah said.
He said it is also ironic that the second highest tax-paying State in the country does not get an adequate reward for its contribution. “We will urge the 16th Finance Commission to increase the weightage assigned to tax effort to incentivise efficiency and fiscal performance,” he said, adding that the Finance Commission must make necessary adjustments for the intra-State per capita income differentials while arriving at the income distance in making the recommendations.
“Karnataka’s share in tax devolution got reduced from 4.713% under the 14th Finance Commission to 3.647% under the 15th Finance Commission. Karnataka has experienced the biggest cut among the States, a reduction of 25.5%. The current approach considers the income distance as per which, Karnataka loses out to the lower distance from the highest per capita income State,” he said. He also pointed out that it is significant to consider the fact that high per capita income levels arise mainly from the Bengaluru Urban district.
