State bud­gets can give a bet­ter view of econ­omy

Deccan Chronicle - - Edit - The au­thor is a Del­hibased com­men­ta­tor and an­a­lyst Parsa Venkatesh­war Rao Jr

Many of us in the news busi­ness, es­pe­cially those based in New Delhi, fail to take note of the state bud­gets, and give over­rid­ing im­por­tance to the Union Bud­get. It does not give an ac­cu­rate pic­ture of what is hap­pen­ing in the coun­try’s econ­omy and what the gov­ern­ments are do­ing. While Prime Min­is­ter Naren­dra Modi and his col­leagues speak of co­op­er­a­tive fed­er­al­ism, there is not much talk of eco­nomic fed­er­al­ism. The Cen­tral govern­ment is not the lone torch-bearer of the na­tion’s eco­nomic growth. The achieve­ments and fail­ures, the con­tra­dic­tions and anom­alies are spread out in both the Cen­tral and state bud­gets.

Three state bud­gets pre­sented on Fe­bru­ary 7 and 8 pro­vide an in­ter­est­ing view on what is hap­pen­ing on the eco­nomic front in some parts of the coun­try. The Ut­tar Pradesh and Odisha bud­gets were pre­sented on Fe­bru­ary 7 and that of Tamil Nadu on Fe­bru­ary 8. The po­lit­i­cal thrust of these three state bud­gets are con­spic­u­ous. Ut­tar Pradesh Chief Min­is­ter Yogi Adityanath said that bud­gets should be wel­fare-ori­ented (lokkalyankari) and not pop­ulist (lok-lub­havni)! Tamil Nadu and Odisha have pro­jected growth rates of eight per cent, which is higher than the 7.1 per cent av­er­age of the na­tional growth rate. And all the three gov­ern­ments have laid out ex­pan­sive al­lo­ca­tions in terms of in­fra­struc­ture and the wel­fare of dif­fer­ent sec­tions of peo­ple.

In Odisha, the Naveen Patnaik govern­ment has an­nounced `10,000 as­sis­tance to farm­ers in its in­terim bud­get com­pared to the `6,000 per an­num of Union fi­nance min­is­ter Piyush Goyal’s in­terim bud­get and the `8,000 that the Te­lan­gana govern­ment is of­fer­ing to farm­ers. The Odisha govern­ment re­jected the Cen­tral govern­ment’s Ayush­man Bharat scheme and in­tro­duced the Biju Swasthya Kalyan Yo­jana and al­lo­cated `864 crores for the scheme.

Both in Tamil Nadu and in Ut­tar Pradesh out­lays for ed­u­ca­tion are quite im­pres­sive,

`28,757 crores has been al­lo­cated to the ed­u­ca­tion depart­ment,

`1,656 crores for school ed­u­ca­tion, `1,072 crores for the lap­top scheme in Tamil Nadu. In Ut­tar Pradesh, `910 crores has been al­lo­cated for schol­ar­ships to stu­dents from the mi­nor­ity com­mu­nity, and `549 crores for Arab-Farsi madrasas in the state. While the per capita in­come in Tamil Nadu is

`1,42,267 per an­num, in Ut­tar Pradesh it is

`55,500.

There is the cu­ri­ous fact in the Ut­tar Pradesh bud­get that tax on liquor, which is ex­pected to fetch `165 crores, will be spent for the up­keep of stray cat­tle. A to­tal of `612.6 crores has been ear­marked for stray cat­tle and the con­struc­tion of gausha­las, or cat­tle shel­ters.

The other in­ter­est­ing fact is that UP has de­clared its share of Goods and Ser­vices Tax (GST) to be `77,000 crores — `31,000 crores from ex­cise and `78,000 crores from Mo­tor Ve­hi­cle Tax. This should make the econ­o­mists sit up and an­a­lyse that the tax earn­ings of the most pop­u­lous state in the coun­try have this top­sy­turvy pic­ture where state taxes out­strip that of the GST, though the state’s share of the GST should be com­men­su­rate with its to­tal tax earn­ings of the preGST pe­riod.

It does not seem to be the case. It’s GST share can­not be its share of the Cen­tral pool of taxes, but much more. It is also in­ter­est­ing that all three states have man­aged to rein in their fis­cal deficits.

For­mer Union fi­nance min­is­ter Yash­want Sinha had ar­gued in 2013 that it was the good per­for­mance of the states’ economies that was buoy­ing up the na­tion’s eco­nomic growth rate, and that the Cen­tral govern­ment can­not take the credit for this. There is rea­son then to look closely at the states’ economies be­cause ev­ery once in a while we hear the econ­o­mists groan­ing that it is the fis­cal deficit of the state gov­ern­ments that threat­ens to sink the na­tional econ­omy.

There has also been the ar­gu­ment that cen­tralised plan­ning is not right and that the states should have the free­dom to set their own de­vel­op­ment and eco­nomic pri­or­i­ties. But Prime Min­is­ter Naren­dra Modi and the BJP be­lieve in a cen­tralised state, and co­op­er­a­tive fed­er­al­ism is noth­ing but a eu­phemism of the Cen­tral govern­ment set­ting the na­tional eco­nomic agenda, which is an anom­aly in a fed­eral setup. If the states are left free to do what is best for them, then there would not be much need for the Cen­tral govern­ment to preen about is man­age­ment of the na­tional econ­omy.

A close and com­par­a­tive scru­tiny of the states’ and Cen­tral bud­gets would re­veal that many of the Cen­tral wel­fare schemes are over­lap­ping with those of the state gov­ern­ments, and that the Cen­tral govern­ment should end this in­dul­gence. This would free up the Cen­tral bud­get to fo­cus on de­fence, cur­rency and for­eign pol­icy. In­dia has come to a stage when the Cen­tral govern­ment need not play the big brother in guid­ing the states to man­age their eco­nomic af­fairs.

While Prime Min­is­ter Modi had done the right thing in closing the Plan­ning Com­mis­sion, he has not yet given up the im­pe­rial project of the Cen­tral govern­ment to set the na­tional eco­nomic agenda. In­dia has grown be­cause the states are do­ing well, and it is time that the states take the credit for the good and the bad that is hap­pen­ing in their states.

The states’ bud­gets and their economies present a truer pic­ture of the na­tional econ­omy than the out­lays in the Cen­tral bud­get. The trend of state gov­ern­ments seek­ing for­eign in­vest­ments goes back to the late 1970s, when chief min­is­ters in then Andhra Pradesh like M. Channa Reddy and N.T. Rama Rao sought in­vest­ments from non­res­i­dent In­di­ans (NRIs) in North Amer­ica. They did not al­ways suc­ceed, but they showed the way. Eco­nomic fed­er­al­ism is the flavour of the mo­ment.

While Prime Min­is­ter Modi had done the right thing in closing the Plan­ning Com­mis­sion, he has not yet given up the im­pe­rial project of the Cen­tral govern­ment to set the na­tional eco­nomic agenda. In­dia has grown be­cause the states are do­ing well, and it is time that the states take the credit for the good and the bad that is hap­pen­ing in their states.

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