One important issue that the government of Karnataka needs to consider is balancing the expenditure requirements of the budget with the financial implications of the execution of its five ‘Guarantee’ schemes. The Shakti scheme, Gruha Jyothi scheme, Gruha Lakshmi scheme, Anna Bhagya scheme, and the Yuva Nidhi scheme were rolled out as welfare measures to offer direct support to the common man, particularly women, poor households, unemployment among youth, and low income groups. Though these schemes enjoy wide acceptance socially and politically due to their humanitarian nature, their huge cost has put immense pressure on the finances of the state.
The first and most important problem is the huge financial cost. According to the 2024-25 budget speech, it was revealed by the Karnataka government that ₹52,000 crore would be handed to people through the five Guarantee schemes. According to the budget analysis for 2025-26, ₹51,034 crore was spent on the five schemes which is indeed a humongous amount. PRS informs that the above expenditure is expected to be around 17% of Karnataka’s revenue receipts in 2025-26.
However, an issue here is that these programs are not a one-time cost, but a recurring annual expense. For instance, Gruha Lakshmi gives monthly financial aid to women head of families; Gruha Jyothi subsidizes the electricity consumed; Shakti gives free bus rides to women; Anna Bhagya ensures food security; and Yuva Nidhi is a program aimed at the unemployed youth. These programs create a recurring financial burden for the state. Once the people start relying on these programs, reducing or stopping them politically becomes very hard. As such, the state will have to allocate funds annually regardless of any decline in tax revenues or increase in other expenditures.
The other key problem relates to the allocation for developmental purposes. A state government needs funds to build roads, construct schools, hospitals, irrigation facilities, provide transportation, urban amenities, pay salaries and pensions, and repay debts. With most of the budget allocated to welfare programs, there will be less money left for development. While welfare programs benefit people immediately, development creates sustained economic growth. This implies that the government needs to balance immediate social protection with future development.
The other issue with the guarantee schemes is that they add up to borrowing and the fiscal deficit. The budget estimate of Karnataka for the year 2025-26 was approximately Rs.4.09 lakh crore with high revenue expenditure requirements. Reports have suggested that the fiscal deficit of Karnataka has already reached the 3% ceiling norm due to high spending on welfare programs and revenue pressure. Fiscal deficit implies that the government will have to resort to borrowing. Borrowing per se is not wrong; however, it may be counterproductive when the proceeds of the borrowing are utilized towards recurring expenditure only.
The next hurdle is that of revenue uncertainty. The state government depends on its own taxes, grant-in-aid, and its share from the central government budget. If there is a revenue shortfall as per the estimation, the government may find itself in an awkward situation. In case of a revenue shortfall, the government will not be able to fulfill its liabilities and will be left with no choice but to delay payments, cut down funds to other departments, hike taxes, or even borrow.
The other problem faced by the government is administrative efficiency. A large welfare program entails proper beneficiary identification, proper digital infrastructure, timely disbursements, and leakages. Errors in the list of beneficiaries lead to inclusion of ineligible beneficiaries and exclusion of eligible beneficiaries. Power subsidies, food distribution, cash transfer programs, and transport subsidy programs will have to coordinate with different departments. An inefficient process leads to an increase in expenditure without delivering the necessary impact.
But there are positive points in the scheme too. The programs can enhance household incomes, mobility of women, promote food security, and offer a cushion against inflation. Free transportation will enable women to access employment and educational opportunities and healthcare services. Cash transfer programs will increase household consumption. Power subsidy programs can ease the burden of poor households. Hence, the question is not whether such welfare programs are good or bad, but whether they are affordable and sustainable.
For addressing this problem, the government of Karnataka should adopt prudent financial management techniques. The government may be required to step up tax revenue generation, eliminate unnecessary expenses, maximize benefits, and make sure that expenditures on welfare do not affect expenditures on education, healthcare, infrastructure, and industries. The government might also conduct routine audits to examine whether the programs are benefitting the targeted groups or not.
Conclusion
Karnataka’s Guarantee schemes can be said to be an innovative welfare program model. The scheme strives to lessen poverty among poor households. However, its high annual expenditure poses a challenging budgetary situation. The government is faced with the task of balancing between social justice and sound financial policies. If handled prudently, the schemes may enhance welfare and accountability. Otherwise, they will cut development funds, result in borrowings, and create financial problems for the state.
