Bihar package, a poll bonanza

The announcement of a big economic package for Bihar by Prime Minister Narendra Modi has election bonanza writ large on it. The state is going to have Assembly elections in the next few weeks, and there is no other reason why the largesse should be announced now. It would have violated the model code of conduct for elections if it was announced a few days hence. But that does not detract from the impropriety of promising a largesse to a state on the eve of elections. It gives an undue advantage to the party whose government makes the promise and makes the election an unequal fight. It is an attempt to please or bribe the voter, and unfortunately it can remain a promise. Rs 1.25 lakh crore package is a post-dated cheque. It may bounce if Nitish Kumar returns to power. There is no commitment that the package will be implemented if the BJP wins, too. Election promises have a way of fading away, like some made by Modi himself before the Lok Sabha elections.

The argument that Bihar is a backward state which deserves the package is strong but is not right in this context. There are many other states which are backward and which have been seeking special central assistance. Punjab, Odisha and West Bengal have for long been demanding it. If backwardness is the criterion, UP and some of these and other states are equally deserving of the package. The Rs 1.25 lakh crore assistance, which will swell to Rs 1.65 lakh crore with an earlier aid commitment, amounts to more than one per cent of the national GDP. It is meant to be spent over the next few years, but the harm such unscheduled spending does to the fiscal situation is great. There is no budgetary provision for any part of the package, and any spending will only increase the fiscal deficit which, after a long time, may be coming under control. The best norms of public finance frown upon such arbitrary transfers. The norms of transfer of funds to the states have been laid by the Finance Commission. Both the commission and the Niti Aayog have opposed such discretionary transfers. The discretionary amount is so big in the Bihar package that it will upset the fiscal balance for a long time.

That gives rise to the suspicion whether the pack-age will actually be delivered. If the government does not, then impropriety will be compounded by deceit. Governments have in the past also resorted to package politics before elections. But voters have not always been swayed by them.

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