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Bengaluru, Mar 26 (PTI) Due to the increasing trend in subsidies, the Karnataka government was forced to cut down its funds for some of its ongoing schemes, such as nutrition, assistance to local bodies and gram panchayats in rural development programmes, the CAG has said.

The Comptroller & Auditor General of India's report on state finances for the 2024-25 fiscal, tabled in the Assembly on Thursday, said that the implementation of the five guarantee schemes in the current form without rationalisation of the existing subsidies or financial assistance or better targeting would place a "strain" on the state's finances.

The Congress government spent Rs 52,525 crore on the five guarantee schemes ('Shakti', 'Gruha Lakshmi', 'Gruha Jyoti', 'Yuva Nidhi' and 'Anna Bhagya') in 2024-25.

The total expenditure on the five guarantee schemes was around 20 per cent of the revenue receipts and 27 per cent of own revenue of the state, the report said.

Noting that during the year 2024-25, while the state's revenue grew by 10.63 per cent over previous year, its expenditure grew by 14.99 per cent, it said, "The increase in growth of revenue expenditure was mainly on account of the guarantee schemes." "Though the revenue growth is stable, it is insufficient to absorb the recurring costs of the guarantee schemes and hence the state needs to rely on borrowings to fund the guarantee schemes," it added.

The CAG in its report also said that, due to the increasing trend in subsidies, the state was forced to cut down its funds to some of its ongoing schemes such as Nutrition, Assistance to Local Bodies/Corporations/Urban Development Authorities/Slum Improvement Board, Assistance to Gram Panchayats in Rural Development Programmes etc.

The CAG said the mismatch between the receipts and expenditure contributed to the revenue deficit of Rs 20,834 crore. Consequently, the fiscal deficit of the state also increased from Rs 65,522 crore in 2023-24 to Rs 85,030 crore in 2024-25.

"To finance the guarantee schemes and the deficits arising thereof, the state availed net market borrowing of Rs 71,525.15 crore which was Rs 8,525.15 crore more than previous year's net borrowings (Rs 63,000 crore)," it added.

The report also noted that though the state's overall capital expenditure increased by Rs 5,786 crore in 2024-25 when compared to previous year, the actual expenditure/assistance by the state towards infrastructure increased by Rs 3,284 crore (after reducing Gol assistance, investment and off-budget borrowing).

"This compression in gross capital formation may prove to be detrimental to future growth prospects," it warned.

The CAG said the increase in borrowing would lead to an increase in debt servicing obligations.

"High repayment of principal and interest obligations could crowd out capital expenditure viz., developmental/ infrastructure investment and other welfare measures," it said, adding that increased borrowings would have the risk of breaching the fiscal targets specified in the Karnataka Fiscal Responsibility Act (KFRA). 

(Disclaimer: This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)