GOVERNMENT OF KARNATAKA FINANCE DEPARTMENT

1 P lP P g . GOVERNMENT of KARNATAKA GOVERNMENT OF KARNATAKA . FINANCE DEPARTMENT . MEDIUM TERM FISCAL PLAN. 2013 - 2017. (2013 . ). (As presented to the Legislature during July 2013). Medium Term Fiscal Plan 2013-17. Table of Contents Foreword Chapter 1- Introduction a) economic outlook b) Growth Risks in the State Economy c) Inflationary Trends d) Trends in Growth Rate e) Fiscal Situation of the State in FY 12-13 and MTFP 12-16 Review f) Fiscal Management Review Committee g) Key Fiscal Challenges h) Fourteenth FINANCE Commission i) Efficient Management of Public Expenditure j) New Commitments Chapter 2-Macro economic outlook a) KARNATAKA 's GSDP and Forecast b) Growth Prospects and Road Ahead Chapter 3-Evaluation of Fiscal Performance a) Fiscal Consolidation Roadmap and Status b) Other Institutional Reforms under KFRA.

2 C) Fiscal Performance of the State in FY12-13 vis- -vis FY11-12. d) Performance of receipts, expenditures and fiscal indicators (FY09-10 to FY12-13). e) Fiscal Performance Table A. Chapter 4-Revenue Performance and Reforms a) Tax Policy and Strategy b) Tax Effort c) Performance of Major Own Taxes i. Commercial Taxes ii. State Excise iii. Stamps and Registration iv. Motor Vehicles Taxes d) Cess Receipts e) Non Tax Revenues i. Royalty on Major and Minor Minerals ii. Interest Receipts iii. Other Non Debt Capital Receipts f) Accounting of Direct Releases of Central GOVERNMENT Medium Term Fiscal Plan 2013-17. Table of Contents ( ). Chapter 5- Expenditure Management a) Trends in GOVERNMENT Expenditure.

3 B) Plan, Non Plan, Development and Non Development Expenditure c) Sector-wise Outlay d) Beneficiary Oriented Schemes and Subsidies e) Resource Transfer to Local Bodies f) Committed Expenditure g) Capital Expenditure to GSDP. h) Delegation of Fund Release powers to Administrative Departments Chapter 6-Public FINANCE Management and Systemic Reforms a) Overall Debt Scenario b) Composition of Debt c) Management of Borrowings d) Maturity Profile of Outstanding State GOVERNMENT Securities e) Creation of Consolidated Sinking Fund (CSF). f) Contingent Liabilities g) Cash Management h) Public Disclosure of Fiscal Situation on Quarterly basis i) Systemic Reforms Chapter 7-Medium Term Fiscal Plan Projection 2013-17.

4 A) Brief assessment of sustainability of certain fiscal parameters b) Balance between Revenue Receipts and Revenue Expenditures c) Use of Capital Receipts including Borrowings for generating productive assets Medium Term Fiscal Projections for 2013-17 (TABLE-B). Underlying Assumptions for the projections in MTFP13-17. Annexed Statements - Disclosures as required under Sec 5(2)(c) of KFRA. LIST OF TABLES. Table No. Description 1 GSDP at current market prices Trends on Annual Growth Rates of India's GDP and 2. KARNATAKA 's GSDP (at Constant Prices). 3 Fiscal Performance of State 4 Trends in Sector wise Composition of GSDP (Current Prices). 5 Trends in Sector wise Composition of GSDP (Constant Prices 2004-05.

5 Series). 6 Compliance to KFRA fiscal and debt norms 7 Fiscal performance of the State in FY12-13 vis- -vis 2011-12. 8 Fiscal Deficit Trends 9 KFRA Ceiling on Total Liabilities A Fiscal Performance 2009-13. 10 Buoyancy of State's Own Taxes 11 Commercial Tax Trends during FY12-13. 12 Excise Trends during FY12-13. 13 Stamps and Registration Fees Trends during FY12-13. 14 Motor Vehicle Taxes Trends during FY12-13. 15 Expenditure on Services 16 Outlay under Major Development Sectors 17 Explicit and Implicit Subsidies 18 Committed Expenditure as a ratio of Uncommitted Revenue Receipts 19 Composition of Gross Public Debt 20 GOVERNMENT Guarantees B Medium Term Fiscal Plan Projections 2013-17.

6 LIST OF ANNEXURES. Statement Description No. Tax Expenditure/Revenue Foregone under Deferment of Purchase 1. Tax on Sugarcane pertaining to FY 11-12 & FY 12-13. Information on Tax Expenditure / Revenue Foregone by exemption or 1A deferment of Value Added Tax (VAT), Central Sales Tax (CST) and Entry Tax (KTEG) pertaining to FY 2012-13. 1B Abstract of Statement 1-A. Tax Waivers by State GOVERNMENT through the Reimbursement 1C. route / Loan route Compliance Cost of Major State Taxes (Commercial Tax, Stamps 2 duty, Motor Vehicle tax, Excise). Revenue Consequences of Capital Expenditure and physical assets of 3 major departments 4 GOVERNMENT Land Details Future Expenditure Commitments of major policy changes during FY.

7 5 12-13. 6 Liabilities in Public Private Partnership Statement of Compliance 1. The Medium Term Fiscal Plan 2013-17 is tabled before the Legislature in compliance with Section 3 of the KARNATAKA Fiscal Responsibility Act (2002). 2. Section 3 of the Act requires the MTFP to include the following elements, all of which can be found in the document as shown below: a. The medium-term fiscal objectives of the GOVERNMENT (Chapters 1, 3, 4, 5, 6. and 7). b. An evaluation of the performance of the prescribed fiscal indicators in the previous year(Chapter 3). c. A Statement of recent economic trends and prospects for growth and development (Chapter 1 & 2). d. The strategic priorities and key fiscal policies of the GOVERNMENT and an evaluation of their consistency and broad conformity to fiscal management principles set out in Section 4.

8 (Chapters 4to 7). e. Four - year rolling targets (Chapter 7 & Table B). f. An assessment of sustainability relating to the balance between revenue receipts and revenue expenditures and the use of capital receipts including borrowings for generating productive assets. (Chapter 7). 3. Disclosures as per amended Section 5 (2) of KFRA (Annexed Statements). 4. Table A Fiscal Performance in the previous four financial years vis- -vis the Budget Estimates (in Absolute terms and as a percentage of GSDP). 5. Table B Medium Term Fiscal Projections for four years including the current year 2013-17 (in Absolute terms and as a percentage of GSDP). Foreword to Medium Term Fiscal Plan 2013-17 (MTFP).

9 MTFP 2013-17 was presented to the Legislature in February 2013 as required under the KARNATAKA Fiscal Responsibility Act (KFRA), 2002 and KARNATAKA Fiscal Responsibility Rules, 2003. At that time MTFP was premised on the then prevailing economic and fiscal challenges and on the proposed budget estimates for the Financial Year 2013-14 being placed in the Legislature during February 2013. In view of a new GOVERNMENT in place, a fresh budget for the full Financial Year 2013-14 is now being presented during July 2013. In view of the recent changes in economic scenario and reprioritisation of expenditure requirements in the fresh budget, it was found necessary to bring out a fresh MTFP 2013-17.

10 While a large portion of MTFP 13-17 includes issues brought out in the earlier MTFP presented in February 2013, the developments thereafter and its impact on the fiscal management have also been brought out in this edition of MTFP. The statement of compliance at the beginning of the MTFP 13- 17 lists out the key elements covered in this document. MTFP. 13-17 continues taking into cognizance the key challenges on the Revenue and Expenditures side identified earlier. To analyse the fiscal performance of the State during 2012-13, the Revised Estimate figures for FY12-13 would continue to be used since final accounts for the FY12-13 is yet to be compiled and certified by Comptroller & Audit General of India.