How Karnataka generates resources, and spends it
The story of India’s rise is also the story of the rise of its states. While a lot of attention is given to the government of India’s budget and policies, those of the states get far lesser attention. This year, the government of India’s budget of Rs19.7 trillion translates to about Rs14,967 per person in India. Once you remove the transfers to states, the Union budget is reduced to Rs13,176 per Indian.
In comparison, the southern state of Karnataka has a budget this year of Rs1.63 trillion, which translates to about Rs24,732 per resident of the state. Thanks to the Fourteenth Finance Commission, states have more control over their budgets than ever before. There is a steady rise in states’ own resources and untied devolution of central taxes. Correspondingly, there is a rebalancing of centrally-sponsored schemes and plans which forced states to spend resources on policies and schemes designed in New Delhi.
In relatively prosperous states like Karnataka, state governments may spend up to twice as much as the Union, and on subjects that touch every aspect of daily lives. Here is a look at how the Karnataka government generates resources and where it chooses to spend it.
Devika Kher and Pavan Srinath are with the Takshashila Institution, an independent think tank and school of public policy.