The growth momentum of Karnataka’s economy is likely to continue at a steady pace with a positive outlook in the agriculture sector, which has picked up significantly due to a good southwest monsoon, according to the Mid-Year Review of State Finance (MYR). Department of Finance.
“The fiscal performance of the state in the first half of 2024-25 has been exceptional, with an increase in revenue receipts of 13.8% compared to the same period of the previous year. The increase in revenue collection reflects the progress of the state’s economic activities,” said the MYR report tabled in the Assembly on Tuesday.
“The state’s successful efforts to promote economic growth, favorable policies, infrastructure development, and incentives to attract both domestic and international businesses point to a promising future for Karnataka. These initiatives are expected to create employment opportunities and strengthen the industrial and service sectors,” the report said.
GST revenue
According to the report, the increase in revenue collection reflects the progress of the economic activities of the state. The state ranks second in total GST revenue contribution in the country. An increase of 11% has been achieved in the total GST revenue generated by the state in the first half of 2024-25 compared to 2023-24, it pointed out.
“Strong economic growth, increased consumer demand, good governance and the government’s focus on creating a business-friendly environment have led to an increase in the state’s economic activity with strong economic fundamentals,” the MYR report said.
Utilization of budget
The report states that “increased efficiency in administration has enabled the state to increase budget utilization, with 37% of the budget estimate already spent by September 2024, compared to 34% in the previous financial period.”
The government’s expenditure on capital projects increased by 28.3 per cent in the first half of 2024-25 compared to 2023-24, demonstrating its commitment to infrastructure development, the report said.
foreign investment
As the government attaches great importance to development projects, our state continues to receive more capital investment. In the first half of 2024-25, the state attracted foreign investment of $3.5 billion. Additionally, in the first half of the financial year, Karnataka ranked third in the country for attracting foreign investment,” the report said.
Inflationary trends in the state are under control, the report pointed out, while after reaching a level of 6.11% in May 2024, inflation dropped to 4.92% in September. “A robust labor market, robust capital flows and a stable financial sector highlight a solid foundation of macroeconomic stability in the state, supporting steady growth,” it said.
loss within range
According to the report, the fiscal deficit is estimated at 2.9% of GSDP which is within the limit of 3% mandated under the Karnataka Fiscal Responsibility Act, 2002.
The state’s overall revenue collection was 45% of the budget estimate for 2024-25, a 14% growth rate over the previous year’s revenue collection in the first half, the report noted. The report states that the state’s own tax revenue, which is the main component of revenue collection, has increased by 10.5 percent in the first six months of the financial year compared to the collection of 2023-24.
‘Government increase in employee salary is the main cause of revenue loss
A mid-year review of state finances has pointed out that the revision of pay scales of Karnataka government employees, as recommended by the 7th Pay Commission, is a major contributing factor to the revenue shortfall.
“The state has prudently managed its debt profile by monitoring its expenditure in 2024-25. The state’s fiscal deficit and outstanding debt are kept within the mandatory limits under the Karnataka Fiscal Responsibility Act, 2002. However, the increase in committed expenses such as salaries, pensions, interest payments, and subsidies has pushed the state into a revenue deficit,” said the MYR report tabled in the Legislative Assembly on Tuesday.
He also pointed out that efforts are being made to rationalize revenue collection and expenditure to return the state to a state of revenue savings. In absolute numbers, the state’s total liabilities are expected to increase from ₹ 5,81,228 crore in 2023-24 to ₹ 6,65,095 crore in 2024-25, the report said.
published – December 18, 2024 at 01:02 pm IST