Bihar set to gain from Rajan panel recommendations

A committee headed by the then chief economic adviser Raghuram Rajan for evolving a composite development index of backwardness of states and suggest criteria for devolution of Central funds to states has advocated for a fixed basic allocation of 0.3 per cent of overall funds to less developed states.

Any amount over and above this funds will be allocated based on needs and performance of the states.

Finance Minister P Chidambaram said: “The committee has recommended that each state may get a fixed basic allocation of 0.3 per cent of overall funds, to which will be added its share stemming from need and performance to get its overall share.”

The committee’s twin recommendations of 0.3 per cent basic allocation and classification into the three categories, effectively subsumes the current special category classification.

Bihar, Chhattisgarh, Gujarat and Rajasthan are likely to gain the most from the committee’s recommendations, while West Bengal, Uttarakhand, Kerala and Tamil Nadu stand among potential losers.

The committee has recommended an allocation of 12.04 per cent for Bihar, higher than the current share of 7.42 per cent in Central assistance to state plans and finance commission’s share in Central taxes of 10.06 per cent.

This spells good news for Bihar Chief Minister Nitish Kumar, who had proclaimed in September last year, “Whoever supports special status for Bihar, we will support them at the Centre.”

Bengal set to lose

The Trinamool Congress-ruled West Bengal is, however, seen as a potential loser as per the committee’s recommendations. Its allocation share is likely to reduce to 5.50 per cent from the current 6.93 per cent in total Central assistance to state plans and 6.72 per cent in the finance commission’s share in Central taxes.

The report will be examined and views of various ministries on devolution of funds will be taken before it is implemented, Chidambaram added.