Karnataka headed for debt trap? Not really

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By Rajesh Kamath
Bangalore , February 15 ; The overall size of Karnataka’s 2013-14 budget is Rs 1,17,005 crore while total liabilities are estimated to be Rs 1,34,472 crore, which appears staggering on the face of it.
Is Karnataka headed for a debt trap? Not really.
In the first place, the total liabilities of Rs 1,34,472 crore is estimated to be 22.35 per cent of the GSDP, which is within the ceiling of 25.2 per cent limit of the Karnataka Fiscal Responsibility Act for the year 2013-14.
Chief Minister Jagadish Shettar underlines fiscal discipline of the State. He has figures to back his contention.
Fiscal debt and public debt have been within the targets prescribed by the Central government and the 13th Finance Commission. Over the last five years, the tax revenue is ten per cent of GSDP, which is among the highest in the country. The Plan size has increased by two and a half times over the last five years.
Per-capita plan expenditure of Rs 6,810 is among the highest in the country. The State has also ensured that its borrowings are kept within the annual fiscal space available. However, during Financial Years 2008-2011, the State was allowed to incur fiscal deficits in excess of three per cent.
By ensuring that adequate revenue surplus is maintained, the State utilised a larger part of this additional fiscal space during this period to borrow for meeting only its capital expenditure.
As a result, it is anticipated that repayment obligations would be slightly on the higher side from the financial year 2017-18 onwards.

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