NEW DELHI: With NDA and Mahagathbandhan engaged in a game of one-upmanship, Bihar’s weak fiscal situation is set to turn precarious no matter which alliance wins the assembly polls on November 14. Bihar is already in the category of worst-performing states, fiscally, along with Punjab, Himachal Pradesh and Assam. Prohibition, in force for almost a decade now, means that it lacks what has been a steady source of revenue for other states.
In the build up to the polls, NDA govt added more burden on its budgetary expenditure raising old age pension from Rs 400 to Rs 1,100 per month, giving Rs 10,000 each to 75 lakh women under CM Rojgar Yojana and a free electricity scheme of up to 125 units a month for each household, besides several other benefits.But they all pale before the promise of opposition Mahagathbandhan to provide each of the nearly 2.76 crore households a govt job. Bihar has 20 lakh govt employees and implementation of the unprecedented promise would entail a gargantuan expenditure, more than Rs 10 lakh crore, according to an estimate. This is several times Bihar’s total budget. Mahagathbandhan led by RJD’s Tejashwi Yadav has also announced Rs 2,500 a month to women and free electricity up to 200 units a month.Short of ranking states on their performance in achieving developmental goals and economic consolidation over past 10 years (2013-14 to 2022-23), CAG – in a first-of-its-kind study released recently – warned about fiscally weak states, including Punjab, Himachal Pradesh, Bihar and Assam.With their estimated committed expenditure – spend on salary, pension and interest payment – ranging between 35-70% of their total budgetary expenditure; fiscal deficit at around 5-6%; state’s own tax revenue (SOTR) lower than 20-30% of revenue receipts; and liability as high as 45% of the state GDP, the emerging situation paints a very gloomy picture on the future health of these states, worsening the possibility of economic turnaround in the short term, at least. All northeastern states have far worse conditions with their committed expenditure in the range of 70% and SOTR lower than 20%, the federal auditor has noted.Maharashtra, Gujarat, Karnataka, Odisha and Telangana are on the other side of the spectrum – among best performing states with their SOTR as high as 65-80% of revenue receipts; committed expenditure as low as 30-40%; fiscal deficit as low as 0.7-2%; and total liability to GSDP as low as 15-18%.Many states depend financially on central govt and receive money in the form of tax devolution and grants besides loans and advances. For instance, during 2022-23, revenue receipts of 28 states was over Rs 35 lakh crore, of this, the states’ own and non-tax revenues were 56% of revenue receipts, the rest came from share in Union taxes (27%) and grants (17%).SOTR comes from SGST and VAT on liquor and fuel that are out of the unified GST regime. Royalty on minerals and dividends and interest received from state PSUs primarily consists of states non-tax revenue. According to CAG, in 2022-23, six states of Haryana, Telangana, Maharashtra, Gujarat and Karnataka had SOTR of 69-80% of their revenue receipts. If northeastern states are excluded, Bihar, Himachal and West Bengal are among the states with lowest SOTR of 28-44%.
