Despite a buoyancy in tax collection in Karnataka, which has enabled higher revenue receipts, the State has been constrained owing to the declining share from Central taxes as well as grants during the last five years, causing concerns.
While the share from Central taxes over the last five years has come down from 2.42% in 2017-2018 to 1.58% in 2022-2023, the trend of decline has been reported in the grants from the Centre as well.
The grants from the Centre declined from 1.17% in 2017-2018 to 0.90% in 2020-2021, the Economic Survey released by the government on Friday said.
It noted that Central grants, which are historically a major component of State Budgets, are expected to decline from 19.9% of the total revenue receipts in 2020-2021 to 11.73% in 2022-2023. “Compositionally, the decline is sharp in other transfers,” the survey noted.
From the divisible pool
Similarly, during the 15th Finance Commission period, the State’s share in the divisible pool of Central taxes has declined from 1.98% in the 14th Finance Commission to 1.5% in 2020-2021, and also during the five-year period of 2021-2026 period of the 15th Finance Commission.
The overall share of Karnataka in the Finance Commission grants has reduced to 3.17% in the 15th Finance Commission from 4.71% in the 14th Finance Commission.
“An important and serious challenge for Karnataka during the 15th Finance Commission period is the decline in the share of the State in the divisible pool of Central taxes. Based on the 15th Finance Commission’s own estimates, Karnataka could see the decline in Central tax transfers by about 24.5%, between the two commission’s recommendations, which is going to pose a severe challenge for the State to cope in the next five years,” the Economic Survey cautioned.
Grant-in-aid decline
Meanwhile, on Friday, Chief Minister Basavaraj Bommai, presenting his second Budget, said that the State’s share in Central taxes increased by 25% over the last year and is estimated to be ₹37,252 crore for 2022-2023 as against the revised estimate for 2022-2023 of ₹34,596 crore.
However, the grants-in-aid from the Centre has declined by 25% from ₹17,281 crore in 2022-2023 to ₹13,005 crore in 2023-2024.
