From Our Special Correspondent
Daijiworld Media Network
Bengaluru, Jan 20: Karnataka is making a strong representation before the 16th Finance Commission to examine the current anomalies in the federal fiscal transfers and ensure that the transfer criteria needs a relook with sufficient emphasis on efficiency along with the equity concerns, said Chief Minister Siddaramaiah in Bengaluru on Saturday.
Addressing a national seminar on ‘’Fiscal Federalism: Challenges before the 16th Finance Commission,’’ organised by the MS Ramaiah University of Applied Sciences, he said ‘’Karnataka has suffered heavy revenue loss on account of the Finance Commission recommendations in the past which needs to be challenged before the Sixteenth Finance commission.’’
Warmly complimenting the M.S. Ramaiah University of Applied Sciences, Fiscal Policy Institute and the Finance Department for organizing the National level seminar as it is the most appropriate time when the 16th Finance Commission is constituted.
The Chief Minister said Karnataka’s share in tax devolution got reduced from 4.713 per cent under the 14th Finance Commission to 3.647 per cent under the 15th Finance Commission.
``Karnataka has experienced the biggest cut among the States, a reduction of 1.066 per cent. The current approach considers the income distance, as per which, Karnataka loses out due to the lower distance from the highest per capita income state,’’ he said.
Siddaramaiah, who has presented a record number of 14 budgets so far and is set for presenting his 15th annual budget on February 16 for the year 2024-25, said it is important to consider the fact that high per capita income levels arise mainly from Bangalore urban district at Rs. 6,21,131. This approach has deprived Karnataka of adequate resource transfers to address the low per capita income of certain districts.
``Finance commissions must make necessary adjustments for the intra state per capita income differentials while arriving at the income distance in making the recommendations,’’ he said pointing out that ‘’it is ironic that the second highest tax paying state in the country does not get adequate reward for its contribution.’’
``We will urge the 16th Finance Commission to increase the weight assigned to tax effort by the 16th Finance Commission to incentivize efficiency and fiscal performance,’’ he said.
The Chief Minister pointed out that Karnataka has a proven track record of sound fiscal performance does not get any incentive for its fiscal efficiency.
``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 the revenue deficit have always been within the stipulated limits, barring the post COVID reappearance of revenue deficits,’’ he said.
In India state governments have major expenditure responsibilities, very often not backed by commensurate revenue sources. It is in this context that the resource transfers of the Finance Commissions matter significantly in the effective discharge of state level expenditure responsibilities even while retaining their fiscal autonomy.
Karnataka, he said is facing many challenges in sustaining its economic growth even while ensuring that it is balanced and inclusive. In addition, the state has to cope with the budgetary implications of the centrally sponsored schemes.
He said Karnataka’s economic and human development requires significant investments in the 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.
He pointed out that urbanization is placing growing demands on the upkeep of the infrastructure and provision of basic services in the city centers. The problem is compounded by the increased pressure on the city centers on account of growing migration.
‘’The cities that are the major growth engines of the state, especially that of Bangalore needs further fillip to its infrastructure. It is very well known Bangalore city’s contribution to the state’s revenue is substantial and it is important to provide the required state support to sustain its growth,’’ he said.
The state has been experiencing persistent regional imbalances despite its concerted effort using the Empowered Committee’s assessment. As per the Economic Survey 2022-23, Bengaluru Urban District’s Percapita Income ranks first with Rs. 6,21,131 and last is Kalaburagi with Rs.1,24,998.
Imbalances in the human development also are glaring with Bangalore Urban sharing the first position with HDI value of 0.738 and Yadgir, Kalaburagi and Raichur are the districts in the last 3 positions with HDI value 0.538, 0.539 and 0.562 respectively.
The state’s efforts need to be supplemented with additional resources to bring about balanced regional development, he emphasised.