Karnataka Budget Analysis

2020-21
The Chief Minister, Mr. B. S. Yediyurappa, presented the Budget for Karnataka for the financial year 2020-21 on
March 5, 2020.
Budget Highlights
 The Gross State Domestic Product (GSDP) of Karnataka for 2020-21 (at current prices) is estimated to be
Rs 18,05,742 crore. This is a 6.3% increase from the revised estimate of 2019-20. In 2019-20, the GSDP is
estimated to grow at a rate of 21% over the previous year (at current prices) as per the revised estimates.
 Total expenditure for 2020-21 is estimated to be Rs 2,37,893 crore, a 5% increase over the revised
estimate of 2019-20. In 2019-20, total expenditure is estimated to decreased by Rs 7,528 crore (3.2%) from
the budgeted estimates.
 Total receipts (excluding borrowings) for 2020-21 are estimated to be Rs 1,80,216 crore, an increase of
1.5% as compared to the revised estimate of 2019-20. In 2019-20, total receipts (excluding borrowings) are
estimated to fall short of the budgeted estimate by Rs 4,540 crore (2.5%).
 Fiscal deficit for 2020-21 is targeted at Rs 46,072 crore (2.55% of GSDP). In 2019-20, fiscal deficit decreased
by Rs 3,299 crore to 2.28% of GSDP, as compared to the budgeted 2.48% of GSDP. The budget estimates a Rs
143 crore revenue surplus (0.01% of GSDP) in 2020-21.
 In 2020-21, sectors such as Irrigation and Flood Control (29%), Rural Development (23%), and Water Supply,
Sanitation, Housing and Urban Development (13%) saw the highest increase in allocations. Allocation to the
Agriculture and Allied Activities sector (24%) saw the highest decrease.
Policy Highlights
 Tax proposals: Multiple changes have been proposed to different state taxes. Some of these include: (i)
3% increase in sales tax on petrol and diesel, (ii) reduction of stamp duty to 2% for first registration of new
houses below 20 lakhs, (iii) increase in excise duty by 6%.
 Mukhyamantrigala Nava Nagaroththana: A new scheme has been launched for overall development of
Bengaluru city. This will include different projects such as solid waste management, lake development,
transportations among others. Rs 8,344 crore has been allocated towards this project.
 State provides an additional assistance of Rs 4,000 under the Pradhan Mantri Kisan Samman Scheme. Rs
2,600 crore will be spent on this scheme during the year.

Karnataka’s Economy Figure 1: Growth rate in GSDP and sectors in

Karnataka at constant (2011-12) prices
 GSDP: The growth rate of Karnataka’s GSDP
17.8%

17.4%

(at constant prices) has decreased from 13.3% 20%

13.3%
11.2%

10.8%

in 2016-17 to 6.8% in 2019-20.

9.8%

15%
 Sectors: In 2019-20, agriculture,
8.4%

7.8%
6.3%

7.9%

manufacturing, and services contributed 10%,

10%
6.8%

26%, and 64%, respectively, to the state’s

5.7%

4.9%
3.7%
3.1%

economy. In the same year, these sectors grew

by 3.7%, 4.9%, and 7.9%, respectively. 5%

 Per capita income: The per capita GSDP of 0%

Karnataka in 2018-19 (at current prices) was
Rs 2,31,491. This is 12% higher than the per
-2.9%

-5%
capita GSDP in 2017-18.
Agriculture Manufacturing Services GSDP
 Unemployment: According to the Periodic
Labour Force Survey 2017-18, Karnataka has 2016-17 2017-18 (SRE) 2018-19 (FRE) 2019-20 (AE)
an unemployment rate of 4.8%, which is lower
Sources: Karnataka Budget Document 2020-21, Central Statistics
than the all-India unemployment rate of 6.1%. Office, MOSPI; PRS.
Note: These numbers are as per constant prices, which implies that the
growth rate is adjusted for inflation. SRE – Second Revised Estimates,
FRE – First Revised Estimates, AE – Advance Estimates

Manish Kanadje
March 5, 2020
[email protected]
PRS Legislative Research  Institute for Policy Research Studies
3rd Floor, Gandharva Mahavidyalaya  212, Deen Dayal Upadhyaya Marg  New Delhi – 110002
Tel: (011) 43434035  www.prsindia.org
 Karnataka Budget Analysis 2020-21 PRS Legislative Research

Budget Estimates for 2020-21

 Total expenditure in 2020-21 is targeted at Rs 2,37,893 crore, which is 5% higher than the revised estimate
of 2019-20. This expenditure is proposed to be met through receipts (other than borrowings) of Rs 1,80,216
crore (77%) and borrowings of Rs 52,918 crore (23%). Total receipts (other than borrowings) in 2020-21
are expected to be 1.5% higher than the revised estimate of 2019-20. Borrowings are estimated to increase
by 9.1% in 2020-21, as compared to the revised estimate of 2019-20.
 In 2019-20, as per the revised figures, expenditure is estimated to decrease by Rs 7,528 crore (3.2%) in
comparison to the budgeted estimate, whereas receipts (other than borrowings) are estimated to fall short by
Rs 4,540 crore (2.5%) during the same period.
Table 1: Budget 2020-21 – Key figures (in Rs crore)
% change from % change from
2018-19 2019-20 2019-20 2020-21
Items BE 2019-20 to RE 2019-20 to
Actuals Budgeted Revised Budgeted
RE 2019-20 BE 2020-21
Total Expenditure 2,14,529 2,34,153 2,26,625 -3.2% 2,37,893 5.0%
A. Receipts (except borrowings) 1,65,004 1,82,138 1,77,598 -2.5% 1,80,216 1.5%
B. Borrowings 41,914 48,601 48,490 -0.2% 52,918 9.1%
Total Receipts (A+B) 2,06,918 2,30,738 2,26,088 -2.0% 2,33,134 3.1%
Revenue Surplus 679 258 285 10.5% 143 -49.7%
As % of GSDP 0.05% 0.02% 0.02% 0.01%
Fiscal Deficit 38,442 42,051 38,752 -7.8% 46,072 18.9%
As % of GSDP 2.73% 2.48% 2.28% 2.55%
Primary Deficit 23,019 22,991 20,111 -12.5% 23,855 18.6%
As % of GSDP 1.63% 1.35% 1.18% 1.32%
Note: BE indicates Budget Estimate and RE indicates Revised Estimate.
Sources: Karnataka Budget Documents 2020-21 (Annual Financial Statement, MTFP Statement); PRS.

Expenditure in 2020-21
 Capital expenditure for 2020-21 is proposed to be Rs 58,117 crore, which is an increase of 17% over the
revised estimate of 2019-20. Capital expenditure includes expenditure affecting the assets and liabilities of
the state, such as: (i) capital outlay, i.e. expenditure which leads to creation of assets (such as bridges and
hospitals), and (ii) repayment and grant of loans by the state government.
 In 2020-21, capital outlay is estimated to be Rs 43,059 crore, which is 16.6% higher than the revised
estimate of 2019-20. Sectors receiving the highest allocation for capital outlay in 2020-21 include irrigation
and flood control (40% of the total capital outlay), and transport (20%).
 Revenue expenditure for 2020-21 is proposed
to be Rs 1,79,776 crore, which is 1.6% higher Subsidies: The state provides subsidies to the departments of
agriculture and co-operation, power, housing, and transports
than the revised estimate of 2019-20. Revenue
among others. In 2020-21, Karnataka will provide subsidies of Rs
expenditure includes subsidies, and payment of 23,476 crore. This is 8.6% lower than the revised estimate of
salaries, pension, and interest. 2019-20, where Rs 25,688 crore was provided as subsidies.
 Revenue expenditure forms 76% of the total
expenditure in 2020-21. Remaining 24% of the total expenditure comprises of capital outlay (18%), and
repayment and grant of loans (6%).

Table 2: Expenditure budget 2020-21 (in Rs crore)

% change from % change from
2018-19 2019-20 2019-20 2020-21
Items BE 2019-20 to RE 2019-20 to
Actuals Budgeted Revised Budgeted
RE 2019-20 BE 2020-21
Capital Expenditure 50,229 52,548 49,655 -5.5% 58,117 17.0%
of which Capital Outlay 34,659 39,080 36,930 -5.5% 43,059 16.6%
Revenue Expenditure 1,64,300 1,81,605 1,76,970 -2.6% 1,79,776 1.6%
Total Expenditure 2,14,529 2,34,153 2,26,625 -3.2% 2,37,893 5.0%
A. Debt Repayment 11,083 9,964 10,275 3.1% 11,605 12.9%
B. Interest Payments 15,423 19,060 18,641 -2.2% 22,216 19.2%
Debt Servicing (A+B) 26,506 29,025 28,916 -0.4% 33,822 17.0%
Note: BE indicates Budget Estimate and RE indicates Revised Estimate.
Sources: Karnataka Budget Documents 2020-21 (Annual Financial Statement); PRS.

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Sector-wise Expenditure in 2020-21

The sectors listed below account for 66% of the total expenditure towards all sectors in 2020-21. A comparison
of Karnataka’s expenditure on certain key sectors with that by the other states can be found in Annexure 1.
Table 3: Sector-wise expenditure in Karnataka Budget 2020-21 (in Rs crore)
% change
2018-19 2019-20 2019-20 2020-21 from RE 2019-
Sector Budget provisions for 2020-21
Actuals Budgeted Revised Budgeted 20 to BE
2020-21
 Rs 1,080 crore has been allocated to
Education, Sports,
24,532 27,943 28,184 28,967 3% government secondary schools and Rs
Arts and Culture
1,314 crore to government colleges.
 Rs 14,217 crore has been allocated
Irrigation and Flood
14,155 15,775 15,238 19,603 29% towards investment in various public
Control
sector undertakings.
 Rs 2,600 crore has been allocated towards
providing direct assistance in addition to
Agriculture and allied
20,519 22,309 21,805 16,472 -24% Pradhan Mantri Kisan Samman Yojana
activities
 Rs 900 crore has been allocated towards
crop insurance.
Water Supply,
 Rs 830 crore has been allocated towards
Sanitation, Housing
12,635 13,013 12,152 13,749 13% providing loan for constructing ring road
and Urban
around Bangalore city.
Development
 Rs 371 crore has been allocated to child
Social Welfare and
18,253 19,718 17,174 13,395 -22% welfare and Rs 179 crore towards
Nutrition
women’s welfare.
 Rs 9,115 crore has been allocated towards
Energy 10,689 13,128 13,128 12,918 -2%
subsidies to Karnataka electricity board.
 Rs 519 crore has been allocated towards
Transport 12,555 12,479 12,981 12,220 -6% state highways and Rs 849 crore towards
district and other roads.
 Rs 1,433 core has been allocated towards
Health and Family
9,477 9,693 9,170 10,296 12% urban health services and Rs 1,413 crore
Welfare
towards rural health services.
 Rs 4,580 crore has been allocated towards
Rural Development 7,068 7,837 7,910 9,769 23%
grants to gram panchayats.
 Rs 3,027 crore has been allocated to
Welfare of
welfare of SCs, Rs 1,242 crore to welfare
SC/ST/OBC and 11,910 11,114 10,054 9,402 -6%
of STs and Rs 2,352 towards welfare of
Minorities
backward classes.
% of total
71% 69% 69% 66%
expenditure
Sources: Karnataka Budget Documents 2020-21 (Annual Financial Statement, Detailed Demands for Grants, Budget Speech); PRS.

Committed expenditure: Committed expenditure of a state typically includes expenditure towards payment of
salaries, pension, and interest. A larger proportion of the budget allocated for committed expenditure items
limits the state’s flexibility to decide on its other expenditure priorities such as capital investment. In 2020-21,
Karnataka is estimated to spend Rs 81,718 crore on committed expenditure, i.e. payment of salaries, pension,
and interest (equivalent to 45% of the state’s revenue receipts). This implies that the state has 55% of its
revenue receipts remaining for all other kinds of expenditure. Any additional expenditure will be met through
borrowings. On average, 50% of the revenue receipts of a state are spent on committed expenditure.
In 2020-21, committed expenditure is expected to increase by 13.8% as compared to the revised estimate of
2019-20. Expenditure on interest payment is expected to increase by Rs 3,575 crore (19.2%).
Table 4: Committed expenditure for Karnataka in 2020-21 (in Rs crore)
2018-19 2019-20 2019-20 % change from BE 2020-21 % change from RE
Item
Actuals Budgeted Revised 2019-20 to RE 2019-20 Budgeted 2019-20 to BE 2020-21
Salaries 28,967 32,988 33,598 1.8% 37,291 11.0%
Pension 15,109 19,236 19,555 1.7% 22,211 13.6%
Interest 15,423 19,060 18,641 -2.2% 22,216 19.2%
Committed Expenditure 59,499 71,284 71,794 0.7% 81,718 13.8%
Sources: Karnataka Budget Documents 2020-21 (Annual Financial Statement); PRS.

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 Karnataka Budget Analysis 2020-21 PRS Legislative Research

Receipts in 2020-21
 The total revenue receipts for 2020-21 are estimated to be Rs 1,79,920 crore, an increase of 1.5% over the
revised estimate of 2019-20. Of this, Rs 1,19,758 crore (67%% of the revenue receipts) will be raised
through state’s own resources, and Rs 60,162 crore (33% of the revenue receipts) will be in the form of
central transfers, i.e. state’s share in central taxes and grants-in-aid from the central government.
 Devolution: In 2020-21, receipts from the state’s share in central taxes is estimated to decrease by 7.5%
over the revised estimate of 2019-20. In 2019-20, devolution is estimated to decrease by 22.3% to Rs
30,919 crore as compared to the budgeted estimate. This may be due to a 19% cut in the Union Budget for
devolution to states, from Rs 8,09,133 crore at the budgeted stage to Rs 6,56,046 crore at the revised stage.
Annexure 2 outlines the major recommendations of the 15th Finance Commission for the year 2020-21,
particularly the revised share of Karnataka and the other states in central government’s tax revenue.
Table 5: Break up of state government receipts (in Rs crore)
% change from % change from
2018-19 2019-20 2019-20 2020-21
Items BE 2019-20 to RE 2019-20 to
Actuals Budgeted Revised Budgeted
RE 2019-20 BE 2020-21
State's Own Tax* 96,830 1,01,744 1,01,740 0.0% 1,11,991 10.1%
State's Own Non-Tax 6,773 8,055 7,508 -6.8% 7,767 3.5%
Share in Central Taxes 35,895 39,806 30,919 -22.3% 28,591 -7.5%
Grants from Centre* 25,481 32,257 37,089 15.0% 31,570 -14.9%
Revenue Receipts 1,64,979 1,81,863 1,77,255 -2.5% 1,79,920 1.5%
Borrowings 41,914 48,601 48,490 -0.2% 52,918 9.1%
Other receipts 26 275 343 24.7% 297 -13.4%
Capital Receipts 41,940 48,875 48,833 -0.1% 53,214 9.0%
Total Receipts 2,06,918 2,30,738 2,26,088 -2.0% 2,33,134 3.1%
Note: *State’s Own Tax and Grants from Centre figures have been adjusted to account for GST compensation grants as Grants from Centre.
Sources: Karnataka Budget Documents 2020-21 (Annual Financial Statement, Detailed Receipts); PRS.

 Own tax revenue: Total own tax revenue of Karnataka is estimated to be Rs 1,11,991 crore in 2020-21
(62% of the revenue receipts). This is 10.1% higher than the revised estimate of 2019-20. The own tax to
GSDP ratio is targeted at 6.2% in 2020-21, which is marginally higher than the revised estimate of 6% in
2019-20. This implies that growth in state’s tax collections is expected to be marginally higher than the
GSDP growth rate.
Table 6: Major sources of state’s own-tax revenue (in Rs crore)
% change from % change from
2018-19 2019-20 2019-20 2020-21
Items BE 2019-20 to RE 2019-20 to
Actuals Budgeted Revised Budgeted
RE 2019-20 BE 2020-21
State GST* 41,956 42,748 42,748 0.0% 47,319 10.7%
State Excise Duty 19,944 20,950 20,950 0.0% 22,700 8.4%
Sales Tax and VAT 14,003 15,149 15,149 0.0% 17,783 17.4%
Stamp Duty and Registration Fees 10,775 11,828 11,828 0.0% 12,655 7.0%
Taxes on Vehicle 6,568 7,100 7,100 0.0% 7,115 0.2%
GST Compensation Grants 10,754 17,249 17,249 0.0% 16,116 -6.6%
Note: *State GST figures have been adjusted to account for GST compensation grants as grants from centre (and not state GST revenue).
Sources: Karnataka Budget Documents 2020-21 (Annual Financial Statement,
Detailed Receipts); PRS.
GST Compensation: The GST (Compensation to
 State Goods and Services Tax (SGST) is the largest
States) Act, 2017 guarantees states compensation for
component of tax revenue of the state. It is expected five years (till 2022) for any revenue loss arising due
to generate Rs 47,319 crore in 2020-21. This is a to GST implementation. The Act guarantees states a
10.7% increase over the revised estimate of 2019-20. 14% annual growth on their revenue which was
SGST comprises 26.3% of the revenue receipts subsumed under GST. If the GST revenue of a state
estimated for 2020-21. does not match the guaranteed growth, compensation
grants are provided to meet the shortfall.
 In 2020-21, the state is expected to generate Rs
22,700 crore from state excise duty. This is an 8.4% Karnataka has estimated GST compensation grants of
increase from the revised estimate of 2019-20. Rs 16,116 crore for 2020-21, a 6.6% decrease over
the 2019-20 revised estimate. In 2019-20, it expects
 In 2020-21, the state is expected to generate Rs compensation grants of Rs 17,249 crore, which is
17,783 crore from sales tax and VAT (17.4% 60% higher than the Rs 10,754 crore received in
increase from the revised estimate of 2019-20), and 2018-19. An increase in compensation requirement of
Rs 12,655 crore from electricity tax and duty (7% the state reflects a further decrease in GST revenue
growth rate, as compared to the 14% growth
increase from the revised estimate of 2019-20). proposed under the Act.

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 Karnataka Budget Analysis 2020-21 PRS Legislative Research

Deficits, Debt, and FRBM Targets for 2020-21

The Karnataka Fiscal Responsibility Act, 2002 provides annual targets to progressively reduce the outstanding debt,
fiscal deficit, and revenue deficit of the state government.
Revenue deficit: It is the excess of revenue expenditure over revenue receipts. A revenue deficit implies that the
government needs to borrow in order to finance its expenses which do not create capital assets. Once the revenue
deficit is accounted for, only then the borrowings can be used for capital investments. A revenue surplus, on the
other hand, implies that revenue receipts are expected to be higher than revenue expenditure. It provides surplus
funds to the state which can be used for capital investments or repayment of loans. Note that revenue surplus over a
long-term period may also indicate inadequate revenue expenditure by the state.
The budget estimates a revenue surplus of Rs 143 crore in 2020-21 (or 0.01% of GSDP). This is lower than the
revises estimate of 2019-20 at Rs 285 crore (or 0.02% of GSDP). This implies that the state has met the 14th
Finance Commission’s recommendation of eliminating revenue deficit. The 15th Finance Commission has not
suggested any revenue deficit grants for the state since it has been consistently witnessing a revenue surplus.
Fiscal deficit: It is the excess of total expenditure over total receipts. This gap is filled by borrowings by the
government, and leads to an increase in total debt. In 2020-21, fiscal deficit is estimated to be Rs 46,072 crore,
which is 2.55% of GSDP. The estimate is within the 3% limit recommended by the 14th Finance Commission. In
2019-20, fiscal deficit is estimated to be Rs 38,752 crore (2.28% of GSDP), which is 1% higher than the fiscal
deficit of Rs 38,442 crore in 2018-19 (2.73% of GSDP).
Outstanding debt: Outstanding debt is the accumulation Debt Servicing: In 2020-21, Karnataka is expected to
of borrowings taken by the state government over the years. spend Rs 33,822 crore on servicing its debt. This is 17%
At the end of the year 2020-21, the state’s outstanding debt higher than the revised estimate for 2019-20. This
is expected to be 19.5% of GSDP. This is lower than the includes Rs 11,605 crore towards repayment of loans,
limit of 20% of GDP suggested by the FRBM Review and Rs 22,216 crore towards interest payments.
Committee (2017) for the cumulative debt of all states.
Table 7: Budget targets for deficits for Karnataka in 2020-21 (% of GSDP)
Revenue Fiscal
Year Outstanding Debt
Deficit (-)/Surplus (+) Deficit (-)/Surplus (+)
2018-19 (Actuals) 0.05% -2.73% 19.2%
2019-20 (RE) 0.02% -2.28% 18.2%
2020-21 0.01% -2.55% 19.5%
2021-22 0.05% -2.90% 20.4%
2022-23 -1.35% -2.90% 21.0%
Note: Figures for 2020-21, 2021-22, and 2022-23 are budget targets.
Sources: Karnataka Budget Documents 2020-21 (MTFP Statement); PRS.

Figures 2 and 3 show the trend in deficits and outstanding debt of the state from 2018-19 to 2022-23.
Figure 2: Revenue and fiscal balance (as % of Figure 3: Outstanding debt (as % of GSDP)
GSDP) 30%
1% 0.05% 0.02% 0.01% 0.05%
0%
-1%
-1% 20.4% 21.0%
19.2% 19.5%
-2% 20% 18.2%
-1.35%
-2%
-3%
-2.28%
-3% -2.73% -2.55%
-4% -2.90% -2.90%
2018-19 2019-20 2020-21 2021-22 2022-23 10%
(RE) 2018-19 2019-20 2020-21 2021-22 2022-23
Revenue Balance Fiscal Balance (RE)
Note: Figures for 2020-21, 2021-22, and 2022-23 are budget targets. Note: Figures for 2020-21, 2021-22, and 2022-23 are budget targets.
Negative sign indicates deficit and positive sign indicates surplus. Sources: Karnataka Budget Documents 2020-21; PRS.
Sources: Karnataka Budget Documents 2020-21; PRS.
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 Karnataka Budget Analysis 2020-21 PRS Legislative Research

Annexure 1: Comparison of states’ expenditure on key sectors

The graphs below compare Karnataka’s expenditure on six key sectors as a proportion of its total spending on
all sectors. The average for a sector indicates the average expenditure in that sector by 29 states as per their
budget estimates of 2019-20.*
 Education: Karnataka has allocated 13% of its expenditure for education in 2020-21. This is lower than
the average expenditure (15.9%) allocated for education by states (using 2019-20 BE).
 Health: Karnataka has allocated 4.6% of its expenditure for health in 2020-21, which is lower than the
average allocation for health by states (5.3%).
 Agriculture and allied activities: The state has allocated 7.4% of its expenditure towards agriculture and
allied activities in 2020-21. This is marginally higher than the average allocation by states (7.1%).
 Rural development: Karnataka has allocated 4.4% of its expenditure for rural development in 2020-21.
This is significantly lower than the average allocation for rural development by states (6.2%).
 Roads and bridges: Karnataka has allocated 4.7% of its expenditure for roads and bridges in 2020-21,
which is higher than the average allocation for roads and bridges by states (4.2%).
 Police: Karnataka has allocated 3.2% of its expenditure for police in 2020-21, which is lower than the
average allocation for police by states (4.1%).

Spending on education as a % Spending on health as a % of Spending on agriculture as a

of total expenditure total expenditure % of total expenditure
20% 6% 5.3% 12% 10.3%
10.1% 10.2%
15.9% 4.8% 4.6%
4.4% 4.3% 10%
15% 12.3% 12.7% 13.2% 13.0% 7.4% 7.1%
4% 8%
10% 6%
2% 4%
5%
2%
0% 0% 0%
2018-19

2018-19

2018-19
2019-20 (RE)

2019-20 (RE)

2019-20 (RE)
2019-20 (BE)

2020-21 (BE)
Average of 29 states

2019-20 (BE)

2020-21 (BE)

Average of 29 states

2019-20 (BE)

2020-21 (BE)
Average of 29 states
(2019-20 BE)

(2019-20 BE)

Spending on rural Spending on roads and Spending on police as a % of (2019-20 BE)

development as a % of total bridges as a % of total total expenditure
expenditure expenditure
6%
8% 6% 5.4% 5.3%
6.2% 4.8% 4.7% 4.1%
4.2% 4%
6% 3.2%
4.4% 4% 2.7% 2.6% 2.9%
3.6% 3.6% 3.7%
4%
2% 2%
2%

0% 0% 0%
2018-19

2018-19

2018-19
2019-20 (RE)

2019-20 (RE)

2019-20 (RE)
2019-20 (BE)

2020-21 (BE)

Average of 29 states

2019-20 (BE)

2020-21 (BE)

Average of 29 states

2019-20 (BE)

2020-21 (BE)

Average of 29 states
(2019-20 BE)

(2019-20 BE)

(2019-20 BE)

Sources: State Budget Documents 2019-20 and 2020-21 (Annual Financial Statement); PRS.

*
29 states include all states except Manipur. It also includes the Union Territory of Delhi and the erstwhile state of Jammu and Kashmir.

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 Karnataka Budget Analysis 2020-21 PRS Legislative Research

Annexure 2: 15th Finance Commission’s recommendations for 2020-21

The 15th Finance Commission’s (15th FC) report for the financial year 2020-21 was tabled in Parliament on
February 1, 2020. The 15th FC recommended a 41% share for states in the central government’s tax revenue in
2020-21, a 1% decrease from the 42% share recommended by the 14 th FC (2015-20). The 1% decrease is to
provide funds to the newly formed union territories of Jammu and Kashmir, and Ladakh from the share of the
central government. The 15th FC also proposed revised criteria for determining the share of individual states.
Table 8 shows the share of states in the central government's tax revenue †, as per the recommendations of the
14th FC for 2015-20 and the 15th FC for 2020-21. The 15th FC has recommended a 1.49% share for the state in
the centre’s tax revenue for 2020-21 (25% lower than the share recommended by the 14th FC for 2015-20). This
implies that out of every Rs 100 of centre’s tax revenue in 2020-21, Karnataka will receive Rs 1.49. Table 8
also shows the estimated devolution to states by the centre for 2019-20 and 2020-21 (in Rs crore).
Table 8: Share of states in centre’s tax revenue under the 14th and 15th Finance Commissions (2020-21)

Share of states in centre’s tax revenue Devolution to states by the centre

State
14th FC (2015-20) 15th FC (2020-21) % change 2019-20 RE 2020-21 BE % change
Andhra Pradesh 1.81 1.69 -7% 28,242 32,238 14%
Arunachal Pradesh 0.58 0.72 24% 8,988 13,802 54%
Assam 1.39 1.28 -8% 21,721 24,553 13%
Bihar 4.06 4.13 2% 63,406 78,896 24%
Chhattisgarh 1.29 1.4 9% 20,206 26,803 33%
Goa 0.16 0.16 0% 2,480 3,027 22%
Gujarat 1.3 1.39 7% 20,232 26,646 32%
Haryana 0.46 0.44 -4% 7,112 8,485 19%
Himachal Pradesh 0.3 0.33 10% 4,678 6,266 34%
Jammu and Kashmir 0.78 - - 12,171 - -
Jharkhand 1.32 1.36 3% 20,593 25,980 26%
Karnataka 1.98 1.49 -25% 30,919 28,591 -8%
Kerala 1.05 0.8 -24% 16,401 15,237 -7%
Madhya Pradesh 3.17 3.23 2% 49,518 61,841 25%
Maharashtra 2.32 2.52 9% 36,220 48,109 33%
Manipur 0.26 0.29 12% 4,048 5,630 39%
Meghalaya 0.27 0.31 15% 4,212 5,999 42%
Mizoram 0.19 0.21 11% 3,018 3,968 31%
Nagaland 0.21 0.23 10% 3,267 4,493 38%
Odisha 1.95 1.9 -3% 30,453 36,300 19%
Punjab 0.66 0.73 11% 10,346 14,021 36%
Rajasthan 2.31 2.45 6% 36,049 46,886 30%
Sikkim 0.15 0.16 7% 2,408 3,043 26%
Tamil Nadu 1.69 1.72 2% 26,392 32,849 24%
Telangana 1.02 0.87 -15% 15,988 16,727 5%
Tripura 0.27 0.29 7% 4,212 5,560 32%
Uttar Pradesh 7.54 7.35 -3% 1,17,818 1,40,611 19%
Uttarakhand 0.44 0.45 2% 6,902 8,657 25%
West Bengal 3.08 3.08 0% 48,048 58,963 23%
Total 42 41 -2% 6,56,046 7,84,181 20%
Sources: Reports of 14th and 15th Finance Commissions (2020-21); Union Budget Documents 2020-21; PRS.

In addition, the 15th FC has also recommended certain grants-in-aid for various purposes for the year 2020-21.
These include: (i) Rs 74,341 crore as grants to states for eliminating revenue deficit, of which Karnataka will
receive none, and (ii) Rs 90,000 crore as grants to local bodies, of which Karnataka will receive Rs 4,766 crore
(this consists of Rs 3,217 crore for rural local bodies and Rs 1,549 crore for urban local bodies).

†
This excludes the cess and surcharge revenue of the central government as it is outside the divisible pool and not shared with states. As
per the 2019-20 union budget, cess and surcharge revenue account for 15% of the estimated gross tax revenue of the central government.

March 5, 2020 -7-