Patna, Sept. 27: Nitish Kumar seems to have gone cock-a-hoop over the recommendations of the Raghuram Rajan Committee that has tried to hammer out a new formula which will guide disbursals of “some development” funds from the Centre to the needy and indigent states.
But a plain reading of the report makes one wonder whether the chief minister’s overjoyous reaction is to the formula itself, since it neither promises Bihar a special package to deal with its problems of underdevelopment nor does it hold out the hope for a dramatic increase in its fund receipts from the Centre.
Economists and members of trade and industry bodies in Patna are sceptical about what the report will finally bring to Bihar in monetary terms. “The very formation of the Raghuram Rajan Committee was political. It would not have been formed had Nitish Kumar not moved closer to the Congress. Its implementation is political and will depend on the assured support of Nitish to the Congress,” said economist and Patna University professor N.K. Choudhary.
The big question is: what happens to special status for Bihar for which the rallies and signature campaigns were held? “The committee has done away with the concept of special state. It has only talked about central assistance. What about tax holidays and subsidies — components which are essential for investment?” said Choudhary.
It is important to remember that the new formula suggested by the Rajan panel won’t apply to a very large chunk of the funds that the Centre routinely disburses to the states. That is because the Finance Commission lays down the principles and the procedures through which the Centre doled out about 54 per cent of the total funds in 2011-12.
The Thirteenth Finance Commission had determined that the share of all the states in “the net proceeds of shareable central taxes shall be 32 per cent in each of the financial years from 2010-11 to 2014-15”.
Another very large chunk — almost 46 per cent — was decided by the Planning Commission, which has its own formula for apportioning funds to states.
The Rajan committee has only proposed a general method for allocating funds from the Centre to states based both on a state’s development needs as well as its development performance. It has not, however, proposed the quantum of funds that should be allocated based on these criteria as that was not within its terms of reference.
In any case, the central government has to first accept the Rajan formula, which, at least initially, will be used to only decide the flow of funds from the Backward Region Grant Fund (BRGF), which has a corpus of about Rs 11,500 crore.
Satyajit Singh, the chairman of PHD Chamber of Commerce and Industries, Bihar, alleged that the committee was silent on the issue of lack of private investment or the role of tax concessions. “The Wanchoo committee, Pandey committee, Gadgil formula — all talked about removing the imbalances in regional development. Once the backward states got ready to face the challenges of developing private investment and industrialisation, the central government changed the goalpost. The Rajan report also endorses the changing goalpost technique of the central government,” Singh said.
If Nitish Kumar is still sporting a smile, then it must have something to do with possible “promises” made to him during the backroom parlays with the Congress satraps.
The Rajan committee has left some place for such “discretionary” generosity from the Centre — which doesn’t figure in the arithmetic that has been built into its formula.
“The Centre may want to offer additional forms of support to states that are particularly underdeveloped. Our index offers an opportunity to do thatů. The 10 ‘least developed’ states that currently score above 0.6 could, for instance, be targeted for specific addition support.”
Bihar was ranked as the second worst in the underdevelopment index with a score of 0.765, just marginally behind Odisha’s 0.798.
Nitish seems to be chuffed over the prospect that this opaque “discretionary” element in central fund disbursals to states will now return — promising a big dole to benighted states like Bihar.