UPA’s political economics

There have been reports in the media that the centre is mulling to give special economic packages to Bihar and Uttar Pradesh. No official statement on this matter is out yet but apparently in both cases the centre is seriously considering the proposal. The prime minister's office has reportedly summoned a meeting of Uttar Pradesh's chief secretary and secretaries of eight economic ministries on 11 July to finalise the plan, which as per Akhilesh Yadav’s demands made previously, was to a tune of 90,000 crore. Sources have revealed that a similar package for Bihar may also be discussed. But the case of Bengal which has been demanding such a package since its new government came to power last year is not in the discussion list. One side of the story is of course financial and it is not the first time that such a package is being offered to a state, if it being offered at all. The other side is of course political, which is the problematic part.

Mamata Banerjee has made not one but several requests to the centre for financial assistance and if not direct aid then at least a moratorium on interest on borrowings of the previous government. Mamata’s argument was that since it was the Left government which took the loan, it would be unfair on her government to spend a lion’s share of her income on interests, especially since she has announced a slew of development projects in the state. She had asked former finance minister Pranab Mukherjee to have a relook at the loan deal and consider options that would reduce her financial burden. But Pranab had made no serious noises in her favour. And whatever little he said was meant to send Mamata a signal that finance matters cannot be relegated to political understanding and in case he agrees to it, it could go against his office because he could be accused of making an exception of his own state at the cost of the national exchequer, which Mukherjee obviously did not want.

Now, if the centre does issue a financial package to Uttar Pradesh and Bihar as per the reports doing the rounds, the matter could be seen as a reward for their support of the United Progressive Alliance (UPA) presidential candidate. Though Bihar Chief Minister Nitish Kumar has denied any move for out of turn favours from the centre, other states like Odisha have already started seeing vendetta in this. As per reports, the package is not only to reward loyalists but also to placate the opposition to make way for a new era of reforms that the new finance minister, Manmohan Singh is to unveil soon. But the centre knows the political implications of such a hasty announcement. It would do good to come clean on the parameters of granting packages if it at all mulls to do for some states. Otherwise it can well open one more political Pandora’s box much too soon.
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