Karnataka Poverty Numbers Very High Despite High Per Capita Income: Finance Commission

Karnataka has made several requests to the fifteenth Finance Commission in a two day meet between the state and Commission members in Bengaluru. Commission Chairperson, NK Singh, said the state's arguments had been forceful. He told media persons, "The state has submitted a memorandum to the Finance Commission."

"There is no doubt that Karnataka represents an engine of India's economic growth...contributing 8 per cent of GDP. Their memorandum is outstanding and well-reasoned asking for more generous treatment. The Chief Minister in his speech was direct and forceful. This is our first experience of visiting a state where so many ministers participated and responded," he said.

"Karnataka is the first state and preceded the Central government on implementation of the Fiscal Responsibility Management Act. The fiscal numbers are more genuine, credible, reliable than for many states."

But there were other issues that raised concern. Mr Singh said, "Educational outcomes and anaemia among children need work to come to the national average."

He also pointed out the high rates of poverty for a state that did so well in some sectors.

"Karnataka does present an irony," he said. "Per capita income is higher here than the national average, but poverty numbers are very high. We see such entrepreneurship along with such poverty."

"There are 2 Karnatakas - one with entrepreneurial energy, and also a far less prosperous state. The poverty rates are at 21 per cent. It should be less than 20 per cent given the per capita income," he added.

The 15th Finance Commission found the state's performance in the agricultural sector was disappointing, even taking into account the successive years of drought.

Commission member Ramesh Chand said, "Agriculture is stagnant or slightly shrinking. Even if the state is facing drought - Rajasthan's growth rate in agriculture is 3 per cent. Is there something fundamentally wrong?"

"Only 33 per cent of the land is under irrigation. There is scope for irrigation to increase. Rainwater harvesting needs attention. Overall, the performance of agriculture leaves much to be desired."

"Some areas of Karnataka receive almost as much rain as Cherrapunjee. But also in some areas there have been 8 years of drought. Agricultural productivity remains unacceptably low. A lot of work on irrigation is needed. The state argued, that given the drought situation, the funds were below what the state deserved. We will look into this with sympathy," Mr Singh said.

Karnataka has said that allocation to state needed reconsideration given that the state is prone to drought.

Another member of the 15th Finance Commission, Arvind Mehta, added, "Large projects are stranded that require investments for drought proofing."

GST continues to be a source of concern for Karnataka.

Mr Singh agreed that work was needed on this front. "A wider concern beyond Karnataka - concern over GST. They pointed out that frequent changes in GST, unfriendly rates - are an area of worry for Karnataka. It is an area of worry for Finance Commission and for India as a whole. Fixation of rate structure should be revenue friendly or revenue neutral," he said.

"I had written to Arun Jaitley and to his successor, Nirmala Sitharaman, that there should be dialogue between Commission and GST Council. Other states would have same concerns that Karnataka raised."

Mr Singh also responded to a question on concerns raised by former chief minister, Siddaramaiah on population of a state being a criterion for allocation of funds - as this would adversely impact states that had managed to control population growth. He said: "Karnataka is not the first state to raise this issue. I think recognising reality and the need for equity are both important. It is not the Commission's intent to punish performance in terms of demographic management."

"We need to recognise needs of population as per 2011 data and also recognise good demographic management."

The Commission members held discussions with Infosys co-founder and former technocrat Nandan Nilekani during their time in Bengaluru.

After the interaction, Chief Minister HD Kumaraswamy told reporters, "The meeting went on very well. We requested whatever the 14th Finance Commission we have lost, whatever commitment they have not fulfilled, at least this time we requested them, give our part. We are hoping for good things. Even Chairman was surprised why the Centre has not allocated the fund properly."