Stay updated with the latest - Click here to follow us on Instagram
© The Indian Express Pvt Ltd
Journalism of Courage
Premium
‘Guarantee schemes in current form to put strain on Karnataka finances’: CAG report
The CAG report was tabled during the recently concluded budget session of the Karnataka legislature.
The CAG report also raised questions on the fiscal sustainability of the Guarantee schemes implemented after the Congress came to power in May 2023. (File Photo)
The implementation of guarantee schemes in Karnataka in their current form would place a strain on state finances, the Comptroller and Auditor General of India (CAG) said in its report on state finances for the year 2024-25.
The report was tabled during the recently concluded budget session of the state legislature. The CAG analysed the five schemes – Gruha Lakshmi, Gruha Jyothi, Anna Bhagya, Shakti, and Yuva Nidhi – and noted that the guarantee schemes were universal in nature, unlike similar schemes in other states that were targeted.
Among the key concerns was revenue pressure. The total expenditure on five guarantee schemes was around 20 per cent of the revenue receipts and 27 per cent of the revenue of the State, the report said. “During the year 2024-25, while the State’s revenue grew by 10.63 per cent over the previous year, its expenditure grew by 14.99 реr cent. The increase in growth of Revenue Expenditure was mainly on account of the guarantee schemes,” it said.
Though the revenue growth is stable, “it is insufficient to absorb recurring costs of the guarantee schemes and hence the State needs to rely on borrowings to fund the guarantee schemes,” according to CAG. Due to the increasing trend in subsidies, the report said that the state was forced to cut its funds to some of its ongoing schemes, such as assistance to local bodies, corporations, urban development authorities, and the Slum Improvement Board, among others.
The report also raised questions on the fiscal sustainability of the said schemes implemented after the Congress came to power in May 2023. “To finance the guarantee schemes and the deficits arising thereof, the State availed net market borrowing of Rs 71,525.15 crore which was Rs 8,525.15 crore more than the previous year’s net borrowing (Rs 63,000 crore),” it said.
Highlighting the economic risks involved in the scheme, the report noted that though the state’s overall capital expenditure increased by Rs 5,786 crore in 2024-25 when compared to the previous year, the actual expenditure/assistance by Karnataka towards infrastructure increased by Rs 3,284 crore (after reducing Gol assistance, investment, and off-budget borrowing). “This compression in gross capital formation may prove to be detrimental to future growth prospects,” as per the report.
The CAG noted that the funds allocated under guarantee schemes would cause a future burden. “High repayment of principal and interest obligations could crowd out Capital Expenditure viz., developmental/infrastructure investment and other welfare measures. Increased borrowings would have the Risk of breaching the fiscal targets specified in the Karnataka Fiscal Responsibility Act. Thus, implementation of the five guarantee schemes in the current form without rationalization of the existing subsidies/financial assistance or better targeting would place a strain on the State’s finances,” the report added.
Advertisement
Loading Recommendations...
Live Blog