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Gamble of stamping Bihar ‘backward’

Bihar Chief Minister Nitish Kumar knows fully well that this poll-bound UPA-II government has no power to arbitrarily accord his state a ‘backward’ status for large special fund support. So does the UPA-II government, which has badly missed the fiscal and current account deficit targets for three successive years ending 2012-2013. Yet, why are the two talking about the special status and special package from the Centre and bluffing the public about exploring such possibilities during the current fiscal itself or before the ensuing nation-wide Lok Sabha election? Even if the two sides come to an understanding on the two issues, there is no way they can get them through without the approval of the 14th Finance Commission, which is supposed to submit its report only by 31 October 2014. The 13th Finance Commission report (2010-2015) accords no such status to Bihar, arguably one of the country’s bottom ranking states in terms of per capita GDP and revenue generation. And, it will be highly foolish to predict for sure that another Congress-led UPA government will be in power in 2014 with Nitish Kumar’s help and support.

If the granting of such a special status and fund support were within the powers of the present UPA-II government, irrespective of the recommendation of the 13th Finance Commission and the criteria laid down by the Reserve Bank of India (RBI), UPA-II would have probably never lost the support of its original ally, Trinamool Congress and its president, Mamata Banerjee, West Bengal chief minister. The Trinamool supremo did not even ask for a ‘backward’ state status. Mamata merely sought a short-term interest waiver on huge amount of past loans she inherited from the previous Marxist-led Left Front government, which the UPA-II failed to oblige purely on technical grounds. She inherited a Rs 2,00,000-crore debt burden, a result of 34 years of fiscal anarchy under the Left rule, the annual interest burden upon which works out around Rs 25,000 crore, leaving little to cover the fixed cost, including salaries of permanent employees, and the state’s modest plan expenditure on development projects. All that the current Janata Dal (United)-Congress bluff bears is a political gambit for both Nitish Kumar and the Congress party’s pre- and post-poll alliance prospects with JD(U). However, more than Congress president Sonia Gandhi’s forthcoming election fortune, at stake is Nitish Kumar’s own political future on this timely bluff as his party faces the Lok Sabha contest, this year end or next year, and the state assembly election around October-November 2015.

The 14th Finance Commission recommendations, if accepted even in toto by the next national government, come into effect only from 1 April 2015. Either way, the gambit is meant to help improve JD(U)’s Lok Sabha and Assembly poll prospects. If the UPA-II accepts the bait and is able to influence the finance commission and RBI decisions in favour of special status and package for Bihar, Nitish Kumar will boast his victory before the people of Bihar to boost his image further. If his plea is turned down by New Delhi and the next finance commission, it may be converted into a major election campaign point raising the emotions of Biharis, in general, against the Centre’s ‘step-motherly’ treatment towards the state.

Among the tasks before the five-member 14th Finance Commission, headed by former RBI governor Y V Reddy, are – a review of the state of finances, deficit and debt levels of the Centre and states, particularly keeping in view the fiscal consolidation roadmap recommended by the 13th Finance Commission; recommendations on the sharing of tax proceeds between the Centre and the states for a five-year period beginning 1 April 2015; pricing of public utilities such as electricity and water in an independent manner; PSU disinvestment; GST compensation to states; sale of non-priority public undertakings and subsidies. The UPA-II government is already far behind the fiscal targets set by the 13th Finance Commission. The Centre has been advised to cap its total debt at 68 per cent of the GDP by the end of 2014-2015, which seems to be difficult in view of large fiscal deficits running since 2010-2011. It can make a large special fund provision to financially ailing, debt-ridden states such as Bihar, West Bengal, Punjab, Kerala and Mizoram at its own peril. Now, here is a more fundamental question: why is Nitish Kumar, who has been Bihar’s Chief Minister for over seven consecutive years since 24 November  2005, and is hyped alongside Gujarat Chief Minister Narendra Modi as one of the country’s two best performing CMs, still keen to brand Bihar ‘backward’? Like Narendra Modi, Nitish Kumar is ever ready to talk about the success of his ‘Bihar model’ in terms of economic growth, progress, social sector and human development indices (HDI) at national and international forums.

Then, why is Nitish Kumar wanting a ‘backward’ stamp for his state? Is it all for additional fund support from the centre? How much fund support does he need to take Bihar ‘forward’, for what duration? The questions are relevant since Bihar ranks as high as 13th among the country’s 28 states in terms of GDP or state domestic product (SDP).

It is just below Punjab and a notch above Odisha. Despite that, it is among the poorest generator of government revenue, which is the key source of all Bihar’s economic ailment.

Under Nitish Kumar, Bihar ranks among the lowest in HDI. For the size and population of the state, the Bihar government is lowly placed in terms of internal revenue generation (only Rs 37,036 crore in 2011-2012) compared to Maharashtra (Rs 4,15,777 crore), Andhra Pradesh (Rs 3,23,369 cr.), Uttar Pradesh (Rs 2,96,417 cr.), Tamil Nadu (Rs 2,73,412 cr.) and Karnataka (Rs 2,52,620 cr.) – India’s top five internal resource generating state governments.

The revenue figures are excluding the share of the union tax pool. Also, Bihar’s per capita SDP is the lowest in the county, Rs 23,435 in 2011-2012 as against Goa’s Rs 1,92,652, Delhi’s Rs 1,75,812, Sikkim’s Rs 1,21,440 and Haryana’s Rs 1,08,159. In only area, Nitish Kumar’s Bihar leads the country is the population growth rate at 3.7 per cent, which is almost 50 per cent higher than the national average of 2.5 per cent. This appears to be the principal cause of Bihar’s poverty and backwardness.

No special status or special fund support from the Centre can improve the Bihar’s HDI, per capita SDP and internal revenue generation until Bihar is able to control its population growth rate. Bihar along with Madhya Pradesh, Rajasthan and Uttar Pradesh are known as BIMARU states. Bimar in Hindi means sick and all of them show high population growth rates, above three per cent. (IPA)
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