Bengaluru, March 23 The Karnataka government told the Legislative Assembly on Monday that it is aware of future challenges and is maintaining a "fiscal balance", as the opposition BJP cautioned about a crisis similar to that in Himachal Pradesh, where salaries for the chief minister, ministers, MLAs, and senior officials were deferred due to a financial crunch.
Responding to the BJP's warnings about increasing subsidies, Revenue Minister Krishna Byre Gowda defended the government's spending on subsidies or "guarantee" schemes.
"In GST collection, which reflects the state's economic activity, Karnataka has the highest growth rate in the country at 11 percent, surpassing Maharashtra and Gujarat," Gowda said during the budget discussion.
Also, Karnataka has India's highest per capita income (PCI). "I am not saying that everyone has an income. But globally, PCI is an indicator of the economy. In the absence of a perfect equation or reflection, we use PCI," he said.
Karnataka's economy has performed better than other states, despite revenues of all states taking a hit due to GST rate rationalization, he further said. "These are some anecdotal examples reflecting the strength of the state's economy, and showing that it is better compared to other states."
"We are mindful of the challenges in the future, but we are also maintaining the balance—the fiscal balance and fiscal health of Karnataka," he added.
Earlier, BJP MLA Sunil Kumar pointed out that 14 percent of the money was going into subsidy schemes and urged everyone to think about it, irrespective of party differences.
Questioning the government whether it was pushing the state towards "subsidy culture", he said, "As the chief minister has said in the Budget, over Rs 1 lakh crore has been spent on the guarantee schemes. We have seen what the Supreme Court has said on freebies......according to the government's own survey, 14 percent of the money was going into subsidy schemes. All of us should think about the long-term implications of this."
Subsidy should become a support for the poor, it should not become a support for elections, he said, adding that governments should understand this.
Senior BJP lawmaker S Suresh Kumar intervened, pointing out that in the Congress-ruled Himachal Pradesh, Chief Minister Sukhvinder Singh Sukhu announced a temporary deferment of a portion of salaries for himself, ministers, MLAs, and senior officials.
"I saw in the newspaper that in Himachal Pradesh, due to the burden of guarantees and subsidies, this has been done," he said, noting that 50 percent of the CM's salary, 30 percent of the Deputy CM's, cabinet ministers', and top bureaucrat's salaries, and 20 percent of the MLAs' salaries will be deferred for the next six months in that state.
Kumar further urged the Karnataka government to conduct a parallel survey or estimate to determine the overall burden of subsidies and their potential reach.
Later, defending the government's spending on subsidies and guarantee schemes, Gowda said, "We have vilified subsidies."
Noting that in the last 150 years, there have been two economic approaches—supply-side and demand-side economics—he said, "On the supply side, tax concessions are provided. While on the demand side, universal basic income is given to spur economic activity by putting more resources in the hands of consumers."
Further stating that every rupee given to a person is used at least five times, which is called the multiplier effect. This, he said, leads to growth in economic activity, increased demand, and automatically boosts production.
"Without strengthening the demand side, even if you give any support to the supply side, it won't help. Ultimately, we need consumers to create demand," he said, adding that money given to people at the bottom of the pyramid in the form of subsidy, would come back into the economy.
