Written by Bakshi Amit Kumar Sinha and Barna Ganguli
Among the 28 states in the Indian Union, Bihar is only the second state after West Bengal to table its budget after Union Budget 2021-22. The NDA government in Bihar on Monday presented a Rs 2.18 lakh crore budget for 2021-22 with special emphasis on education and rural development. This year’s budget is different compared to previous budgets since it comes after the pandemic and the lockdown. Also, it is the first budget after Bihar elections and the Fifteenth Finance Commission submitted its recommendations.
The size of the Bihar budget has increased nine times to touch Rs 218302.70 crore in 2021-22, from Rs 23,885 crore in 2004-05. The allocation of a major chunk of Rs 24,155.75 crore (11.07 per cent) on rural development shows the government’s commitment towards asset creation in rural Bihar. Since 2004-05, Bihar has been a revenue surplus state. The revenue surplus increased continuously till 2014-15 and then jumped by 153 per cent to reach a record high level of Rs 14,823 crore in 2017-18. However, it declined by 52.5 per cent to Rs 6,897 crore in 2018-19, and is projected to increase by 33 per cent to Rs 9,195 crore as per the budget estimate of 2021-22.
This year’s budget denotes an increase of 3.09 per cent in the total expenditure over last year’s estimate of Rs 2.11 lakh crore. While doing budgetary exercise, Bihar always focuses on actual trends. In that case, if we calculate the increase of 2021-22 BE from the actuals of 2019-20 which was Rs 1.44 lakh crore, it shows an increase of 52 per cent over the period of two years. The proposed receipt of the government is Rs 2,18,502.70 crore in 2021-22 as against Rs 2,11,961.49 crore in 2020-21, of which revenue receipt is Rs 1,86,267.3 crore (85.3 per cent) and capital receipt is Rs 32,235.4 crore (14.8 per cent). The anticipated revenue expenditure for 2021-22 is Rs 1,77,071.4 crore, which is 7.5 per cent (Rs 1,64,751.2 crore) higher than the revenue expenditure of 2020-21. Contrary to this, the capital expenditure decreased by 12.3 per cent to Rs 41,231.3 crore in 2021-22. The increase in revenue expenditure shows government’s commitment towards social services, which needs more public spending. But decrease in capital expenditure will have an adverse effect on the economy as capital expenditure means asset creation. One must note here that Union budget is enhancing its budgetary support for capital expenditure.
The revenue receipts comprise of the state’s share in central taxes, grants-in-aid from the central government, the state’s own tax and non-tax revenue. The share of central taxes has always contributed more than half of Bihar’s total revenues. As per estimates of 2021-22, 67 per cent of the state’s revenue will come from share in central taxes and grants-in-aid which is 1.2 percentage points lower than the estimate of 2020-21, when this share was 68 per cent. As per recommendations of the Fifteenth Finance Commission, the share of states in central tax pool is reduced from 42 per cent to 41 per cent. But in terms of share, Bihar had a benefit of 0.4 percentage points as share of the state was increased from 9.66 per cent (14th Finance Commission) to 10.06 per cent (15th Finance Commission). But this would have profited the state had the share been 42 per cent. This is also visible from the Budget estimate of 2021-22. Although Bihar managed to have a surplus budget even after maintaining fiscal discipline as per FRBM norm, the state couldn’t get the benefit of revenue deficit grant.
Generally, expenditure in budget is divided into three heads: General, economic and social along with loans and advances. A sector-wise glance on allocations shows that giving prime importance to education and rural development, the state has earmarked Rs 39,467.3 crore (18.1 per cent) for ensuring quality education and Rs 24,155 crore (11.1 per cent) to rural development for raising basic infrastructure. Second comes the subjects of water supply, urban development where the government allocates Rs 20,917.95 crore (9.6 per cent) followed by social security Rs 17,508.54 crore (8.0 per cent). Next comes irrigation with Rs 13,520.16 crore (6.2 per cent). Health has received Rs 13,011.91 crore, which is around 6 per cent of the total budget. But as health has become a prime subject after the pandemic and calls for more attention from the state, there was an expectation for a lump sum amount for health.
The fiscal deficit is the borrowing requirement of the state and managing the fiscal deficit reflects prudent fiscal management. The state’s fiscal deficit has been estimated at Rs 22,510.78 crore in the budget, which is 2.97 per cent of the GSDP estimated at Rs 7,57,026 crore. As per the provisions of the Fiscal Responsibility and Budget Management Act 2003, no state can cross the threshold limit of 3 per cent of GSDP and Bihar throughout has maintained this limit. However, due to the pandemic, this threshold has been relaxed to 5 per cent in 2019-20 of which 1 per cent is unconditional and 1 per cent is conditional.
The budget has allocated Rs 476 crore on Saat Nishchay Part-2, which includes youth, women, agriculture and irrigation, rural and urban development, connectivity and health. To promote higher education among girls, an incentive amount of Rs 25,000 will be given to intermediate pass students and Rs 50,000 to female graduates. For this, an allocation of Rs 600 crore has been made. Rs 200 crore has been allocated to the industry department to promote women entrepreneurship.
Finally, this is a balanced budget that has maintained the spirit of welfare by estimating an increase in revenue expenditure which will add on the development expenditure of the state. Yet, it was expected that there will be a higher allocation for health as unprecedented times call for unparalleled commitments. This is missing. However, an increase in allocation in education and rural development will boost these sectors to deliver on quality and enhance job opportunities. The government’s focus on rural development is a good indication as it will lead to creation of jobs and assets in the rural sector, which supports 89 per cent of Bihar’s population.
The writers are faculty members at Centre for Economic Policy and Public Finance (CEPPF), Asian Development Research Institute (ADRI), Patna