Karnataka’s drought and agricultural distress have led the state to record degrowth in the agriculture sector, as per observations made by the 15th Finance Commission.
The Karnataka government has sought Rs 1.4 lakh crore as fund requirements, in which Rs 53,000 crore will be allocated to give water supply to all residents, while Rs 21,000 crore will go towards doubling farmer incomes.
The state, which has witnessed eight drought years in the past 10 years, saw agriculture growth at -0.3 percent. This puts Karnataka much behind other states such as Rajasthan, which was hit by drought but have seen agriculture growth at 3 percent.
The commission noted that the state's poor performance in agriculture was despite several innovative initiatives such as moving to high-value crop.
"Several irrigation projects are still incomplete and the state's allocation for drought under the state disaster management funds needed reconsideration," NK Singh, chairman of the commission, said at a media briefing on Tuesday in Bengaluru.
The commission noted only 33 percent of agricultural land in the state was under irrigation.
The commission also noted that while Karnataka's per capita income was significantly higher than the national average, it still had high poverty rates at 21 percent, indicating an intra-state disparity between the urban cities such as Bengaluru and the hinterland. “We expected this to be below 20 percent given Karnataka's performance and the state's contribution to GDP at 8 percent," Singh said.
The commission also said that the state's debt profile seemed to have deteriorated, but said the debt to gross state domestic product (GSDP) was still below 20 percent. The commission observed that Karnataka was among the states that had confirmed with the Fiscal Responsibility and Budget Management Act and had maintained its fiscal deficit under 3 percent.
After its meetings in Karnataka, the finance commission has highlighted the need to rationalise Goods and Services Tax (GST) rates, stating that state revenue growth is hit under GST era compared to Value Added Tax (VAT) regime. The commission said it will initiate dialogue with the GST Council to fix rates and improve outcome under GST.
However, the 15th Finance Commission has let down several states, including Karnataka, by reiterating that the commission has been asked to stick to the 2011 census as terms of reference instead of the 1971 census for resource allocation to states based on the population, but reassured that the commission will ensure that states are incentivised based on their performance in population management.Singh said Karnataka raised the issue during the recent meetings with the commission over the past few days. Overall, the commission said Karnataka has met fiscal parameters but had to tackle challenges of agriculture distress and poverty.