Inter-state and inter-regional disparities in India pre-dates the 1991 reforms. But liberalization has accentuated differences. Among regions bypassed generally by growth are central India, east India and the Northeast. It is also in these areas that resentment, often correlated with violence, is the highest. If one accepts the finance minister’s five criteria of social infrastructure (poverty eradication), physical infrastructure, fiscal consolidation, agriculture and manufacturing, then by any indicator, the East and the Northeast are disadvantaged. Many sick public-sector enterprises that will be closed down are also geographically located in the East and in the absence of physical and social infrastructure, compensating employment generation through the private sector is not an immediate short-term solution. The budget is not the appropriate policy instrument to solve these issues and despite conditionalities, there is little the Centre can do to discipline misgovernance and fiscal mismanagement in states. And in all fairness, the budget speech mentions what was already known, that the 12th finance commission will examine state-level debt and suggest corrective measures, and there will be a debt-swap scheme to allow states to replace high-cost debt. Since social infrastructure, physical infrastructure and agriculture are primarily state-level subjects, without state-government finances being rehabilitated, the East and the Northeast will continue to be bypassed.
Without dismissing the problem of the northeastern states, it should however be mentioned that these are special category states and the problems of the East are somewhat different. One should also mention the budget has a clear emphasis on privatization and public-private partnerships, especially in health and transport. Privatization and public-private partnerships typically require public investments as catalysts. Hence, if status quo continues, the budget’s emphasis will accentuate inter-state disparities further. What makes this worse is specific budgetary proposals — College of Rehabilitation Science in Gwalior, National Institute for Disabled People in Chennai, private airports in Bangalore and Hyderabad, modernization of airports in Delhi and Mumbai, modernization of ports in Mumbai and Cochin, and desert development in Rajasthan — the last being one where the finance minister has affirmed his partisanship.
The East is singularly absent in all this. It is no one’s case that, following precedents set by railway ministers, there should be a finance minister from the East before specific projects are sanctioned for this region. But simultaneously, the finance minister cannot afford to ignore the perception that the East and the Northeast have been marginalized and bypassed in the budget-making process, as they have generally been bypassed in socio-economic development during the Nineties. Such perceptions and realities fuel socio-economic tensions and unlike China, the Indian polity is one where these tensions will manifest themselves and not be suppressed.