For those wondering if the five guarantees the Congress offered were solely to gain electoral victory in Karnataka or were part of a more definitive longer-term strategy, Chief Minister Siddaramaiah’s Budget provides a clear answer.
Rather than merely trying to scramble the resources to cover the five guarantees, Mr. Siddaramaiah has provided a clear affirmation that welfare has the pride of place in the thinking of the Congress government in Karnataka. He has not just provided the financial support for the five guarantees but added some more. There is now insurance for delivery personnel of e-service companies, new toilet complexes in 5,775 schools and 150 colleges, extension of nutritious food schemes for tribal communities, and even standardised grants for temples with no significant earnings.
Who pays and benefits from GST
The Chief Minister justifies this approach not just by citing Basavanna but also through the fact that while much of the GST is collected from the bottom 60% of the population, the economic benefit goes to the top 10%. There is then a moral case for the government to transfer a part of the resources from the rich to the poor. Mr. Siddaramaiah calculates the average benefit per household of the five guarantees and claims they represent the first Universal Basic Income in the country.
The interesting, and unstated, part of this approach is that it faces no compulsion to reduce the glaring inequality. On the contrary, it can only succeed if the inequality provides it sufficient resources to be transferred to the poor. The Budget expects a more buoyant State GST to generate ₹ 22,930 crore more than what was expected in the previous year’s Budget, which is 44% of the total expenditure on the five guarantees. If the burden of GST is on the poor and the guarantees are also for the poor, they are paying for much of it themselves.
The path to pursue growth
The rest of the bill for the guarantees (and the additional welfare measures announced in the Budget) has to come from growth. And in the pursuit of growth the Mr. Siddaramaiah government is careful not to threaten existing inequalities. A major challenge of Karnataka’s growth is regional inequality, with much of it being concentrated in Bengaluru. The Budget has measures that can be expected to consolidate this regional inequality.
One of the most substantial infrastructure initiatives in the Budget is a 100-acre Technology Innovation Park at Kadugodi in Bengaluru. There is also to be a Mega Industrial Township in government-owned BEML land in the city. There are some other clusters mentioned in the Budget, but they can be expected to pale into insignificance compared to the Bengaluru initiatives. The initiatives in the capital will have the huge benefit of a corporate ethos which is already established in the city. Moreover, since the government, especially in the BEML case, owns the land, the new infrastructure will be much more cost effective.
The Budget does try to smoothen the roughest edges of inequality by focusing on the efficiency of some of existing welfare measures. There is a promise to use MGNREGA labour to create more substantial assets. It identifies a number of specific assets that MGNREGA labour will be used to develop, including two lakh drought relief works, 50,000 acres of grasslands, 81,000 flood relief works, and the upgrading of 5,000 school premises. If the land related outcomes increase agricultural activity they will lead to jobs at the lower end of the earning hierarchy. This will be a small dent in Karnataka’s challenge of regional inequality.
Sustainability question
The State government will sooner or later have to confront the question of the sustainability of Karnataka’s current economic growth. With the growth concentrated in Bengaluru, much depends on whether the city can grow fast enough to transfer sufficient resources to the rest of the state as a part of the government’s welfare strategy. And as the pressures on the city and its cost of living keep increasing, there may be no guarantee of Bengaluru’s sustained high growth.
