Economy Mar 18, 2013
For all of Bihar Chief Minister Nitish Kumar's efforts to cloak his demand for 'special status' for Bihar in economic and developmental terms, his rally in New Delhi on Sunday was a thinly disguised political signal indicating his readiness to switch loyalties so long as the price is right.
"Hum Dilli puhunch chuke hain," Nitish Kumar roared. "We have arrived in Delhi." And if "Dilliwallahs" do not grant Bihar our rights, we will grab it by leveraging the power we've displayed today, he thundered.
And the "right" that he articulated most forcefully was Bihar's "right to development" - at the core of which is the demand for 'special status', which comes with larger fiscal transfers from the State. And he spoke up not just on Bihar's behalf, but of other States - like West Bengal,where Chief Minister Mamata Banerjee has been seeking a special package from the Centre to tide over the State's parlous state after 30-plus years of Communist rule.
It is, of course, possible to read Nitish Kumar's rally on Sunday as a platform for the rights-based demand for a fair share of the pie for a State that has historically suffered neglect when it comes to financial transfers from the Centre, which problem has been compounded by rotten governance at the State level. To Nitish Kumar's credit, he had, in his early years in power at least, begun to check Bihar's slide down the slippery slope of a failed State.
The case to review the current top-down arrangement of financial transfers from the Centre to the States is compelling. Under the current framework, States look to the Centre as their "bhagya vidatha" - as the bestower and the determiner of their destiny - in an unequal relationship that requires them to count on New Delhi's benevolence for funds to bridge their financing gap. The model as it exists currently - where it is the Centre that does the bulk of revenue mobilisation, whereas the States are left to pick up the tab - is flawed.
The ongoing debate between the Centre and the States over the contours of the Goods and Service Tax hopes to address some of that inequity.
As this commentary observes, "the nature of India's fiscal federalism is characterised by a severe vertical imbalance." And the flawed design effectively provides little incentive for State level leaders to "look around for ideas about best practices worth implementing" - and instead look to maximise the monetary transfers they can procure from the Centre. "This exhibits the vestiges of an old tendency, whereby State leaders would pin their hopes on Delhi to bail them out and, if that that failed, resort to playing the hapless victim 'neglected' by the Centre."
Nitish Kumar is only playing true to that script. He isn't pitching for that flawed template to be broken: he is asking instead for the perpetuation of that top-down, unequal relationship - and for Bihar (and other States whose leaders he wishes to court on a political platform) to receive a larger share of the Centre's transfers.
And, what's worse, he is cynically hocking his political patronage as the price for such financial benevolence. Media reports (such as this one) point out that the message from what Nitish said "between the lines - and what he left unsaid - was lost on very few: Nitish's support is on the table for the 2014 stakes, and he who gives Bihar special category status, takes it."
To the ruling UPA, the report adds, "this is as clear a come-hither call as it can hope to get from an NDA constituent. To the BJP, it was a laconic dare against promoting his bete noire and Gujarat chief minister Narendra Modi to the poll forefront. Nitish Kumar has a Plan B, and today was its poker-faced unveiling. Should he fetch the right purchase from the UPA, (he) is willing to switch."
But there are two cruel ironies to Nitish Kumar's entreaty to the Congress that he is willing to be had for a price. For one, even as he is pitching for more fiscal transfers, the sobering reality on the ground is that his State government hasnot fully utilised Central funds. Second, and more perverse, the Congress has been in power in Bihar for much of the post-independent period, and therefore it is the Congress that is primarily responsible for Bihar's historical neglect and poor governance. (Of course, that responsibility ought to be shared in more recent times by Lalu Prasad Yadav.) And, yet, Nitish Kumar has indicated that he is ready to strike a political deal with the selfsame Congress.
There are various developmental models from Indian States that are clamouring for validation and amplification at the national level. Nitish Kumar's approach is based not on promotion of the legitimate demand for States' rights and fiscal autonomy, but premised on perpetuating the 'benevolent' Centre model of top-down financial flow as the reward for offering political patronage. And for that cynical reason, it seems certain to find traction with the Congress - and with other State governments in a similar situation - without consideration of the underlying economic demerits of such an approach.
At the fundamental level, Nitish Kumar's 'special status' roar represents the poverty of ideas, and the willingness of politicians to sell their souls too readily.
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