HD Kumaraswamy swearing-in ceremony
Congress-JD(S) combine agrees on letting Kumaraswamy be the Karnartaka CM for 5 years. (Photo: Kumaraswamy taking oath on May 23, 2018)Reuters

Days after announcing waiver of loans taken by farmers, Karnataka Chief Minister HD Kumaraswamy has directed the officials to reduce extraneous expenses to help strengthen the state's finances.

Chief Minister of the state, HD Kumaraswamy has come under immense pressure over the issues of the waiver of farmers' loan. He held a public consultation with farmer leaders and representatives on May 30. He said that saving farmers is his government's priority and promised to honour his pre-poll assurance to waive farm loans within 15 days.

Before the assembly elections, former Chief Minister Siddaramaiah had announced waiver of all loans up to Rs 50,000 taken by farmers from cooperative banks and it cost the state Rs 8,165 crore. Now, HD Kumaraswamy's promise covers not just nationalised banks, but also all loans taken from the formal financial sector. It is likely to cost at the minimum of Rs 53,000 crore to the state.

This decision will affect the economy of the state adversely and the economists and political analysts were wondering how the government would manage the situation. HD Kumaraswamy embarked on an austerity drive and told the officers to review proposals on buying new vehicles and discourage renovation of government offices and residences.

"He (chief minister) has instructed the officials to cut down on unnecessary expenditure, if any, in the state administration," PTI quoted a statement from the chief minister's office.

However, economists and political analysts say that though "extreme austerity" measures could help in a small way, it would cripple, not just the economy, but also agriculture support infrastructure. This includes power and irrigation, apart from slashing budgetary allocations to sectors including education, health and other essential services.

Reports suggest that the finance department has planned to cut down upto three to five percent in the budgetary allocations of all the departments. Besides, it has planned to cut down Rs 2,000 crore from some departments that get the budget of over Rs 10,000 crore every year. This way, the government can save around Rs 15,000 crore per year.

In a statement to a Kannada daily, K Ratna Prabha, the Chief Secretary to state government, said that HD Kumaraswamy has already directed the officials on cutting down unnecessary expenses. He will decide on other savings from various departments. With regard to this, he will soon hold a budget meeting and he will readjust the budget allocation to different department based on their priorities.