As soon as the government was formed, tough bargaining for central funds began

As soon as the government was formed, tough bargaining for central funds began

Andhra Pradesh CM N. Chandrababu Naidu and Bihar CM Nitish Kumar are seasoned players in tough bargaining. After their parties’ strong performance in the Lok Sabha elections, they have now become indispensable for the BJP in the National Democratic Alliance (NDA) government. It is likely that both of them may raise their old demand again. That Delhi should give special status (SCS) to their state on priority basis.

In such a status, the central government gives special financial grants for the rapid development of the economically/geographically backward state. Telugu Desam Party supremo Naidu has been demanding special status for a long time. However, it was promised during the UPA-2 regime when the Andhra Pradesh Reorganisation Act 2014 was being passed in Parliament.

Naidu’s demand was finally rejected in 2018, following which he parted ways with the NDA, after he invited Prime Minister Narendra Modi to lay the foundation stone for the new capital at Amaravati in October 2015. The Amaravati project was close to Naidu’s heart and he wanted to fund it through central funds and external loans.

In the case of Bihar too, on 22 November 2023, when Nitish Kumar was leading the Mahagathbandhan government, his cabinet passed a resolution demanding special status for the state. Delhi did not pay heed to this demand at that time. Now elections are going to be held in Bihar in 2025, so all this is going to change.

The Fourteenth Finance Commission abolished the practice of special category status and the Niti Aayog, which replaced the Planning Commission, is also against the practice of giving such unusual and expensive grants to select states. In such a situation, the NDA-3 government will be forced to look for an alternative. Financial experts say that a special assistance package is under consideration for both the states. Old methods like the Mukherjee-Gadgil formula are being reconsidered. Under this formula, the allocation of plan funds among state governments is calculated by considering the population, per capita income, fiscal performance and special problems of a state.

Nitish has been demanding special status for Bihar since 2010 and his current demand has emerged from the data of the Bihar Caste Survey of 2023. That survey found that 34.13 percent of Bihar’s population lives in extreme poverty. Of these, 18 lakh people belong to unreserved classes, 24 lakh people belong to backward castes, 33 lakh people belong to extremely backward castes, 23 lakh people are Dalits and 2,01,000 people belong to Scheduled Tribes.

With a per capita GDP of around Rs 54,000, Bihar is one of the poorest states in the country. Nitish Kumar wants a one-time benefit of Rs 2 lakh to 94 lakh families who earn less than Rs 6,000 per month. Along with this, generous grants should be given to the homeless, landless and extremely poor families. Rs 2.5 lakh crore will be needed to implement all this.

Andhra Pradesh is also in dire need of funds. According to the Reserve Bank of India’s December 2023 report on state finances, Andhra Pradesh’s fiscal deficit (total excess expenditure over total receipts/income) was estimated at 3.8 per cent of gross state domestic product (GSDP) (Rs 54,588 crore) in the 2023-24 budget. The state’s revenue deficit was 1.5 per cent of its GSDP (Rs 22,317 crore). This is much higher than the current average of fiscal and revenue deficits of 3.1 per cent and 0.1 per cent respectively for all states.

Andhra Pradesh’s outstanding liabilities are 35.2 per cent of its GSDP, much higher than the average of 27.6 per cent for other states. In this gloomy environment, Naidu also has to raise funds for his pre-poll promise of ‘six guarantees’, as well as continue old welfare schemes. The cash benefits under the Super Six schemes include unemployment allowance of Rs 3,000 to every unemployed person, Rs 15,000 annually to every school-going girl, Rs 20,000 annually to every farmer and Rs 1,500 per month to women aged 18 to 59. It is not that easy.

Both Nitish and Naidu are desperate to get more money from Delhi. And this will be guaranteed by special state status. This time Modi and the NDA cannot refuse to accept this demand.

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