It helps states to be friendly with the Centre
With a five-fold increase in the resources transferred from the Centre to the states between FY01 and FY13, through both the statutory finance commission transfers of central taxes as well as other resource transfers like grants and loans, the states have every reason to be grateful. But with a lot more of these resources tied to specific projects, and project designs, that the Centre feels are important, the states continue to protest—the Planning Commission has said it plans to bring in more flexibility in the next Plan. What is more worrying, however, is the larger share of resources that are linked to discretion on the part of the central government. In which case, being on the wrong side of the ruling party/alliance may not be a great idea.
Our anchor story on the front page gives instances of how West Bengal chief minister Mamata Banerjee may already be ruing her decision to cut her ties to the UPA so publicly, and so bitterly. Though interim railway minister CP Joshi has said there will be no roll-back in the investments promised by various Trinamool railway ministers to West Bengal—R40,000 crore or so—this is not something Mamata can take for granted. Apart from this, there is the boost Mamata’s state budget has got due to central largesse—around 60% of FY13’s increased spending targets are based on various central grants coming on time. If the commerce ministry’s move to shift its annual investment jamboree from West Bengal to Uttar Pradesh (where the ruling Samajwadi Party is now a valuable ally) is any indication, this could get jeopardised.
While there are several instances of central governments favouring states—the railway budget is the best example of this, given the lion’s share of projects go to the minister’s state—and this is pretty standard for all parties, the scope for favouritism has increased considerably. There are the obvious weavers’ and Bundelkhand packages, but what’s interesting to look at is the sharp jump in allocations for the discretionary Special Plan Assistance and Special Central Assistance (SPA/SCA). While the Central Assistance to State and UT Plans is up from R33,340 crore in FY01 to R1,22,014 crore in FY13, SPA/SCA has risen from R1,960 crore to R20,153 crore—as a proportion, that’s a hike from 5.9% to 16.5%. This doesn’t necessarily mean the Centre will hold out funds to allies and hold back funds from ex- or non-allies. A closer look at the budgets of both Bengal and Uttar Pradesh will provide some helpful clues over the next two years.