Siddaramaiah with DKS (file photo)

New Delhi: The Karnataka government’s rising expenditure on welfare schemes has put pressure on its finances, leading to cuts in some ongoing programmes, the Comptroller and Auditor General (CAG) said in its report for the 2024-25 financial year tabled in the Assembly on Thursday.

Guarantee schemes consume significant revenue

The CAG said the state spent Rs 52,525 crore in 2024-25 on five guarantee schemes – Shakti, Griha Lakshmi, Griha Jyoti, Yuva Nidhi and Anna Bhagya. This accounts for about 20% of revenue receipts and 27% of the state’s own revenue, highlighting the heavy burden of the schemes on the budget, the report said.“Although revenue growth is stable, it is insufficient to absorb the recurring costs of the guarantee schemes and hence the state needs to rely on borrowing to finance the guarantee schemes,” the report said. During 2024-25, while the state’s revenue increased by 10.63%, its expenditure increased by 14.99%, mainly due to guarantee schemes.

Cuts in other programs and increasing borrowing

The CAG highlighted that rising subsidies forced the government to reduce funding for some ongoing programmes, including nutrition, assistance to local bodies, rural development programs including gram panchayats and urban development initiatives.The mismatch between receipts and expenditure contributed to a revenue deficit of Rs 20,834 crore, while the fiscal deficit increased from Rs 65,522 crore in 2023-24 to Rs 85,030 crore in 2024-25, news agency PTI reported. To bridge the gap, the state took net market borrowing of Rs 71,525.15 crore, an increase of Rs 8,525.15 crore from the previous year.

Concerns over capital expenditure and debt repayment

While total capital expenditure increased by Rs 5,786 crore, the report said actual investment in infrastructure increased by only Rs 3,284 crore after adjusting for central assistance, investment and off-budget borrowings. The CAG warned that “this shortfall in gross capital formation could prove detrimental to future growth prospects.”It further said that higher borrowing will increase debt service obligations, which may reduce spending on developmental, infrastructure and welfare measures. The report warns that continued borrowing growth could risk violating the fiscal targets of the Karnataka Fiscal Responsibility Act (KFRA).