Bihar wants even more
Bihar’s case for more largesse from the Centre may stem from a comparison with special category states
First Published: Sun, Mar 31 2013. 08 08 PM IST
The Planning Commission has found that, in spite of the recent spurt in growth among the poorer states like Bihar, there hasn’t been any significant improvement in income disparities. Photo: Mint
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Updated: Mon, Apr 01 2013. 12 28 AM IST
More than half of the Bihar government’s total revenues
come from its share in central taxes. The chart below shows the share of
central taxes and grants from the centre as a percentage of states’
total budget revenues. The data are for the revised estimates for the
fiscal year 2011-12.
Note that its share in central taxes makes up 51.3% of
the Bihar government’s total revenues. Grants from the centre accounted
for another 24.3%. Adding up the two, more than three-quarters of the
state’s total revenues in its budget comes from resources from the
centre. Bihar has certainly been growing rapidly in recent years, but
the funds enabling that growth have come from the central government. As
far as budgetary support is concerned, Bihar already has a rather
special status.
Of course, Bihar is the country’s poorest state, with a per capita income, at current prices, of Rs.22,691 in 2011-12, far below the national average of Rs.61,564
that year. Its poverty headcount and human development indicators are
terrible. It is for these reasons that the region already enjoys large
resource transfers from the central government.
But consider Uttar Pradesh, another poor state with a per capita income of Rs.30,051
in 2011-12. The chart shows that its share of central taxes made up
37.7% of the state’s budgetary revenues, while grants from the centre
contributed another 15.4%. Thus, slightly more than half of the total
revenue raised by the state government in 2011-12 was from the central
government’s resources. But that’s a far cry from the more than
three-fourths of revenue contributed by the central government for
Bihar’s budget.
The share of grants from the centre in their state
budgets is higher for the special category states—Jammu and Kashmir, the
northeastern states, Uttarakhand and Himachal Pradesh. But it’s also
worth noting that the centre contributes a lower percentage of revenues
in the budgets of many of the special category states.
In 2011-12, Bihar also benefited from loans taken from
the centre. It was the second-highest borrower from the centre that
year, with Andhra Pradesh heading the list. Uttar Pradesh’s borrowing
was less than half of Bihar’s.
That doesn’t mean, though, that Bihar’s borrowing is
reason for concern. According to the 2011-12 state budget revised
estimates, Bihar’s debt to gross state domestic product (GSDP) was 29%,
well below that of Uttar Pradesh, at 38.7% of GSDP, or West Bengal, with
a debt-to-GSDP ratio of 38.6%. Among the non-special category states,
Punjab and Rajasthan had higher debt-GSDP ratios than Bihar. No wonder
then that Uttar Pradesh too is pleading for special status.
Bihar’s own tax revenue, or the amount raised by taxes
within the state, is around 5.1% of the state GDP, taking the 2011-12
revised estimates for tax revenues. Because of the state’s low per
capita income, it’s difficult for it to raise tax revenues. Jharkhand,
another poor state, had an own tax revenue to state GDP percentage of
5.5%. And West Bengal scored even lower than Bihar, at 4.6%, despite
having much higher income. But Uttar Pradesh, in spite of a low per
capita income, manages to raise much more resources. It had an own tax
revenue to state GDP percentage of 7.4%. That’s higher than several rich
states. For example, this yardstick was 6.8% for both Haryana and
Gujarat.
Perhaps Bihar’s case for more largesse from the Centre
stems from a comparison with the special category states, all of whom
have per capita incomes higher than Bihar. Why should Sikkim, with a per
capita income of Rs.121,440,
have special category status, while Bihar with a per capita income of
less than a fifth of that amount, does not? Uttarakhand and Himachal
Pradesh have per capita incomes of 3.5 and 3.3 times Bihar’s per capita
income, yet they enjoy special category status.
The Planning Commission has found that, in spite of the
recent spurt in growth among the poorer states such as Bihar, Jharkhand
and Madhya Pradesh, there hasn’t been any significant improvement in
income disparities, because population growth has been higher in the
poorer states. Inter-state inequalities, as measured by the Gini
coefficient, have been increasing. The Planning Commission states
categorically, “We do not see the phenomenon of convergence across
Indian states, whereby the poorer states, by virtue of growing faster
than the richer states, start catching up with the level of income of
the latter.”
But even if states are helped by the centre, do they in
turn help their poorest districts? The Planning Commission has found
that the ratio of per capita district GDP of Patna to Sheohar district,
which has the lowest income in Bihar, increased from 6.68 in 1999-2000
to 8.65 in 2006-07. And in Bihar’s Madhepura district, the poverty
headcount ratio varies from 19.83% in Bihariganj block to 71.01% in
Puraini block. Will the money actually go the poorest people in the
poorest blocks?Ravindra Kumar
PGDM 2nd
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