Karnataka's Fiscal Strain: The Impact of Guarantee Schemes

The Karnataka government faces financial strain due to an increase in subsidies, forcing cuts in ongoing schemes. The CAG's report highlights the fiscal challenges posed by the implementation of five guarantee schemes, pushing the state towards increased borrowing and a growing fiscal deficit.

The Karnataka government is grappling with financial challenges as revealed by the latest report from the Comptroller and Auditor General of India. The state has been compelled to reduce funds for ongoing schemes, including nutrition and rural development, due to the rising trend in subsidies.

The CAG report, tabled in the Assembly, highlights the fiscal burden imposed by the five guarantee schemes—'Shakti', 'Gruha Lakshmi', 'Gruha Jyoti', 'Yuva Nidhi', and 'Anna Bhagya'. These schemes consumed a significant portion of the state's revenue, accounting for around 20% of revenue receipts and 27% of own revenue for the fiscal year 2024-25.

Despite a stable revenue growth of 10.63%, it lagged behind the expenditure growth of 14.99%, largely attributed to these schemes. Consequently, Karnataka resorted to borrowing Rs 71,525.15 crore, increasing its fiscal deficit and debt servicing obligations, further pressured by increased borrowings.