Union Finance Minister Nirmala Sitharaman accused the Congress government in Karnataka of contributing to the state’s high inflation and deteriorating law and order situation
Speaking to reporters on Sunday, Sitharaman attributed these issues to the policies of the current state administration.
Economic Challenges and Inflation
Sitharaman responded to Karnataka Chief Minister Siddaramaiah’s claims that the central government was being unjust to the state. She pointed out that Karnataka’s economic woes are largely due to increases in fuel prices, milk, and stamp duties, as well as a reduction in capital expenditure.
“The state’s contribution to inflation is significant, with rates higher than the national average. Between June 2023 and June 2024, the national inflation average was 5.4%, while Karnataka’s was 6.1%,” said Sitharaman, a Rajya Sabha member representing Karnataka.
Comparing the BJP’s previous rule in Karnataka to the current Congress administration, Sitharaman highlighted that between June 2022 and May 2023, Karnataka’s inflation was below the national average. During that period, the national average inflation was 6%, whereas Karnataka managed to maintain it at 5.39%.
Reasons for Economic Decline
The Finance Minister cited several reasons for the state’s economic difficulties, including a Rs 3 hike in petrol prices, a Rs 3.5 increase in diesel prices, and a Rs 5 rise in milk prices. Additionally, property guidance values have increased by 25% to 30%, stamp duty charges have gone up by 200% to 500%, and vehicle registration fees have increased by 3%. An additional lifetime tax has also been imposed on electric vehicles.
“The revenue deficit is very high, and capital expenditure is not being prioritized. Instead, the government claims it cannot spend on capital projects because it is focusing on five promised welfare schemes,” she said.
Sitharaman emphasized the importance of capital expenditure for economic growth, stating that it drives demand, boosts consumption, and creates employment opportunities for Karnataka’s youth.
Concerns Over Borrowing and Governance
Sitharaman expressed concerns about Karnataka’s financial management, noting that the state’s open market borrowing has exceeded Rs 1 lakh crore. She also claimed that Karnataka was once revenue surplus just two years ago, but now faces a revenue deficit. Industries are leaving the state, law and order are declining, and SC/ST funds are allegedly being misused, she alleged.
Dispute Over Central Funding
In response to Siddaramaiah’s accusation that Karnataka did not receive its due share in the budget, Sitharaman dismissed the claim as misinformation. She highlighted the significant increase in tax devolution and grants received by the state under the current central government compared to the previous Congress-led UPA government.
Between 2004 and 2014, under the UPA, Karnataka received Rs 81,791 crore in tax devolution. In contrast, from 2014 to 2024, under Prime Minister Narendra Modi, the state received Rs 2,95,818 crore.
“In the UPA era, Karnataka received Rs 8,179 crore per annum under tax devolution. This year alone, PM Modi has allocated Rs 45,485 crore,” Sitharaman noted.
Under the UPA, Karnataka received Rs 60,779 crore as grant-in-aid over ten years, averaging Rs 6,077.9 crore annually. However, under the NDA, last year’s grant-in-aid was Rs 2,36,955 crore. Additionally, Karnataka has received an interest-free loan of Rs 8,312 crore since 2020-21, post-COVID, for a 50-year term.
Infrastructure Investments
Sitharaman highlighted increased investment in infrastructure, noting that the Railways budget allocation for Karnataka rose from Rs 835 crore between 2009 and 2014 to Rs 7,559 crore for the 2024-25 budget. She mentioned 31 ongoing projects for new railway lines worth Rs 47,016 crore and the construction of 638 railway flyovers since 2014. Seven Vande Bharat trains are also now operational in the state.
Regarding the Smart City project, Sitharaman stated that seven cities in Karnataka have been selected, with Rs 6,428 crore allocated. She mentioned 904 projects worth Rs 15,000 crore under this initiative.
Road Infrastructure and Highways
The Finance Minister further noted the construction of 4,600 roads in Karnataka and over Rs 1 lakh crore invested in highways in recent years. Many greenfield projects are being developed under the Bharat Mala Project Phase-1, showcasing the central government’s commitment to improving infrastructure in the state.
(With inputs from agency)
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