From 'provider' to 'enabler': How Bihar's budgetary policies reflect paradigm shift

With the parliamentary election scheduled next year, the Union Budget 2023-24 was much awaited. Similarly, the budgets especially of non-NDA ruled states are of high interest to the policy observers and masses alike. In the state budget presented by the Finance Minister of Bihar Vijay Kumar Chaudhary in Bihar Legislative Assembly, the focus was on agriculture and food processing, employment, health and education. These are the essential ingredients of human capital formation that are essential for long-term growth of the state. Noticeably, he also called for ‘special status’ to Bihar from the Centre, a long pending demand that has strong significance in Bihar’s political economy. The revenue-surplus Bihar Budget 2023-24 reflected well on the state’s key priorities that include supporting the key social sectors with an aim to create a large employment base in the formal sector.   It is in sync with the ruling government’s commitment for creating two millions jobs that the Chief Minister Nitish Kumar announced on Independence Day in 2022.   Remarkably, the size of the budget increased to Rs 2.61 lakh crore this year compared to Rs 2.37 lakh crore in 2022. The focus of the Union Budget 2023-24 presented last month was on increasing capital expenditure to increase long-term assets and infrastructure which are supposed to be the main enabler of job creation.   Bihar has been moving in the right direction in this regard. According to the economic survey 2023-24, the capital expenditure has increased in Bihar by 29.4 per cent in 2021-2022 compared to the previous year. Similarly, the central government had a target of reducing the fiscal deficit to 6.4 per cent in 2022-23 percent from a five year high of 9.3 per cent. Comparatively, Bihar’s fiscal deficit was 3.78 per cent of Gross State Domestic Products (GSDP) which was much below the prescribed 4.5 percent. Key highlights of the Bihar Budget 2023-24:

• Budget Expenditure of Rs 2,61,885.40 crore has been estimated for the Year 2023-24 which is Rs 24,194.21 crore more than Rs 2,37,691.19 crore for the year 2022-23 budget estimate.

• Establishment & Commitment Expenditure for the Financial Year 2023-24 is estimated at Rs 1,61,855.67 crore, which is Rs 24,394.72 crore more than Rs 1,37,460.94 crore for the year 2022-23 budget estimate.

• Annual Scheme Outlay for the financial year 2023-24 is estimated at Rs 1,00,000.00 crore, which is equal to the year 2022-23 budget estimate. Good Governance Programme, 2020-25: Under Seven Nischay-2 of Atmanirbhar Bihar (2020-25) Rs. 5,000.00 crore Budget Estimated in Various Departments for the Financial Year 2023-24.

• Revenue Expenditure for the financial year 2023-24 is estimated at Rs 2,07,848.00 crore, which is Rs 15,891.33 crore more than Rs 1,91,956.67 crore for the year 2022-23 budget estimate.

• Capital Expenditure for the financial year 2023-24 is estimated at Rs 54,037.40 crore, which is Rs 8,302.88 crore more than Rs 45,734.52 crore for the year 2022-23 budget estimate.

• The Capital and Revenue Expenditure for the year 2023-24 Revenue Expenditure is Rs 2,07,848.00 crore and Capital expenditure is Rs. 54,037.40 crore respectively. The total expenditure is Rs. 2,61,885.40 crore. The percentage of Revenue and Capital Expenditure in total expenditure is 79.37 and 20.63 respectively.

• Development and Non-Development Expenditure for the year 2023-24 Development Expenditure is Rs 1,67,375.47 crore and Non-Development expenditure Rs 94,509.93 crore respectively. The total expenditure is Rs 2,61,885.40 crore. The percentage of Development Expenditure and Non-Development Expenditure in total expenditure is 63.91 and 36.09 respectively.

• Total Revenue Receipt has been estimated at Rs 2,12,326.97 crore in 2023-24 which is Rs 15,622.46 crore more than Rs 1,96,704.51 crore for the year 2022-23 budget estimate.

• State’s Own Tax Revenue is estimated at Rs. 49,700.05 crore in 2023-24 which is Rs 8,313.05 crore more than Rs 41,387.00 crore for the year 2022-23 budget estimate.

• State’s Non Tax Revenue is estimated at Rs 6,511.74 crore in 2023-24 which is Rs 376.12 crore more than Rs 6,135.62 crore for the year 2022-23 budget estimate.

• State’s Share in Central Taxes is estimated at Rs 1,02,737.26 Crore in 2023-24 which is Rs 11,556.66 crore more than Rs 91,180.60 crore for the year 2022-23 budget estimate.

• Grants in Aid from Central Government to State is estimated at Rs 53,377.92 crore in 2023-24 which is Rs 4,623.37 crore less than Rs 58,001.29 crore for the year 2022-23 budget estimate.

• The State has Revenue Surplus of Rs 4,478.97 crore during 2023-24 which is 0.52% of GSDP. GSDP estimate is Rs 8,58,928.00 crore for the year 2023-24.

• The Fiscal Deficit has been estimated at Rs 25,567.84 crore which is 2.98% of GSDP estimate at Rs 8,58,928.00 crore for the year 2023-24.

• The Outstanding Public Debt is estimated at Rs 2,76,165.43 crore in 2023-24 which is 32.15% of GSDP of Rs 8,58,928.00 crore. Total debt including liability in public account estimate is Rs 3,24,762.35 crore in 2023-24 which is 37.81% of GSDP of Rs 8,58,928.00 crore.

In numbers, the state’s finances are in good shape and to ascertain the same, the following important fiscal achievements can be taken into consideration:

• The Fiscal Deficit was 3.78 percent of GSDP Rs. 6,75,448.00 crore during 2021-22 which is under the prescribed conditional limit of 4.5 percent.

• Public Debt Liability Rs. 2,08,913.30 crore was 30.93 percent of GSDP Rs. 6,75,448.00 crore during 2021-22. By the end of 31st March, 2022 public debt and other liabilities is Rs. 2,57,510.22 crore.

• The Interest Payment was 8.70 percent of Total Revenue Receipt during 2021-22.

Broadly, the policies are manifestations of the paradigm shift in policy making in the last few decades where the policy regime has acknowledged the major contributions of private enterprises in giving the growth impetus as well as creating the employment opportunities.   Unlike in the initial few decades after India’s independence where it commanded the economy with stringent norms and preference for the public sector, the state in India abandoned its role as a ‘provider’ with the formal liberalisation of the economy in 1991.   Subsequently, the state acted more like an ‘enabler’ but with a resolve of inclusive growth. To make it happen, the state followed a three-pronged strategy of retreat, dismantling and disinvestment. In this fast-globalising world, production and consumption are very closely interdependent. In order to reap the benefits of the economy, the government has to step in as an ‘enabler’ by investing in human capital. This is particularly important for an economy like Bihar where 50 per cent of the population are poor according to the multidimensional poverty index.   The Bihar Budget 2023-24 makes the enabling provisions for positively influencing the human and economic development and with an urge to reduce the outbound migration and change the pattern with which the youths are getting employed. In the state budget, 30 per cent of expenditure on various schemes is on health and education amounting to Rs 29317 crores. Rs 5590 crores were allocated to Primary Health Care Services (PHCSs) redevelopment. Government’s plan to upgrade 21 SADAR (district) hospitals and build 9 medical colleges.   Similarly, the share of education outlay in the budget is also well-placed. Most notable among them was an allotment of Rs 150 crore for bicycles and dresses for girls studying in schools. Similarly, the finance minister announced that 40,546 primary school teachers will be appointed. Additionally, 556 teachers are to be appointed in various engineering colleges. All these reassure the state government’s resolve for creating opportunities locally. In the post-COVID-19 pandemic times, the unemployment rate has been an all-time high. The central budget has announced a cut in the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) scheme from Rs 89,000 crore to Rs 60,000 crore. This amount as a percentage of Gross Domestic Product (GDP) is an all-time low and will have adverse consequences for Bihar as it is one of the highest beneficiaries among all states in India when it comes to engaging the rural workforces with MNREGA.     The Bihar budget will offset some of this loss as the government has announced creation of 10 lakh jobs for the youth through various means. Within the primary sector, as per Bihar’s Finance Minister, the two most important contributors to the growth of GSDP have been livestock and fishing, aquaculture, registering growth rates of 9.5 per cent and 6.7 per cent, respectively.   The Budget statement also pointed out that the grants-in-aid expected from the Centre for the current fiscal year was estimated at Rs 53,377.92 crore, which was Rs 4,623.37 crore less than what was received in the previous fiscal year.   However, the Budget noted a slight increase in the state’s share in Central taxes which was at Rs 1,02,737.26 crore for 2023-24 and had been Rs 376.12 crore more than the previous year. Bihar’s 10.98 per cent growth is third among the top five fastest-growing states in the country. But to end the endemic developmental disorders in Bihar, Bihar’s Finance Minister made a strong pitch: “if special status to Bihar is not given, the Central government, at least, should make arrangement of giving 90-10 per cent basis (90 per cent from the Centre and 10 per cent from the state) grants to the state.” Making economics triumph over politics, Bihar is one of those states which have taken its fiscal responsibility seriously and implemented the Fiscal Responsibility and Budget Management (FRBM) Act in letter and spirit. For this, Bihar Fiscal Responsibility and Budget Management Rules 2022 has been notified. In the year 2023-24, Bihar is again likely to generate a revenue surplus and the fiscal deficit is likely to be contained at 2.98 per cent of state GDP that is within the FRBM limits of 3.0 per cent. This sums up all. Atul K Thakur is a Policy Professional, Columnist and Writer with a special focus on South Asia; Ashmita Gupta is an Economist and Faculty at Asian Development Research Institute (ADRI), Patna. Views are personal. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.