Karnataka to borrow Rs 33,000 crore, total outstanding loans will go up to Rs 80,000 crore

BENGALURU: As Karnataka continues to face an uphill task in returning normalcy amid a continued spike in Covid-19 positive cases, the loss revenue for development continues to be compensated by borrowings.
After the Rs 18,289 crore compensation from the goods and services tax (GST), which in itself is majorly borrowings from the Reserve Bank of India (RBI) but will be serviced by the centre, Karnataka government has decided to go for a market borrowing of Rs 33,000 crore to carry out its administrative and development activities.
On Tuesday, the state cabinet decided to amend the Karnataka fiscal deficit act 2002 to increase the borrowing cap from 3 percent to 5 percent. The decision was based on the central government one time leeway to increase the borrowings of all states to compensate the revenue losses due to Covid-19 pandemic, or as called by union finance minister Nirmala Sitharaman an “act of god”.
“Based on this change, we have a leeway to borrow Rs 36,000 crore. But considering our requirements the government will go for borrowings of Rs 33,000 crore,” said law minister J C Madhuswamy, after the cabinet meeting.
The decision does not come at a favourable time for Karnataka as it already has a huge outstanding market borrowings.
“At present, prior to this decision, the government has approximately borrowed Rs 47,000 crore,” said the minister.
This, in total,would mean the state will have borrowings of roughly Rs 80,000 crore rupees by the start of next fiscal-- 2021-22.
Madhuswamy said the decision was not taken lightly but there was no other option available before the government as the revenue losses had piled up over the last five months.
“While our previous borrowings were mostly for capital expenditure, this time the borrowings will be used for administrative and non-capital expenditures. For, over the last five months, the losses were unexpected and huge,” he justified.
He said the borrowings will also be used to increase the government strength, which is supposedly reeling under short staff and has frozen all hirings.
“On account of our financial crisis, we had frozen all new hirings and development projects. But with this borrowings all those frozen hirings and projects will resume,” he said.