Revenue crunch: How Karnataka government plans to address Rs 12,000 crore shortfall

Confronted with a Rs 12,000 crore revenue deficit, Karnataka government is turning to internal funding sources to decrease reliance on new borrowing. With Rs 90,000 crore allocated to welfare schemes, including the Anna Bhagya scheme benefiting the majority of the population. According to Karnataka CM's economic advisor, subsidies and guarantee schemes are driving expenses to unsustainable levels, needing a review of these programmes.

According to media reports, the cash-strapped state government is likely to set up an investment trust (InvIT), issue bonds to raise funds to raise capital, and try to reduce the burden of borrowing from institutional investors at high interest rates.

According to sources quoted in media reports, this is part of a new proposal mooted by Boston Consulting Group (BCG) that aims to offset the growing burden of bankrolling the five guarantee schemes implemented after Chief Minister Siddaramaiah came to power last year.

Although among the most cash-surplus states in the country, the Karnataka government has claimed that its fortunes have dipped since the introduction of the GST regime, with a lower share of revenues from the Centre, forcing the state to borrow more to fund its welfare and development projects.