Why Covid-19 poses a sharp challenge for Bihar| Analysis
As globalisation has grown, local epidemics tend to spread faster across the world. We are seeing this in the case of the coronavirus disease (Covid-19). While the poor are generally the hardest hit, this time it is the developed countries which have been most affected. In India, the poorer states have not been affected as much as initially believed. The spread of the virus, while not insignificant, has been relatively less in Bihar. Bihar also faces periodic challenges from other infectious diseases such as tuberculosis, kala-azar and encephalitis. Given this, it must deal with the current pandemic at five levels: Historical, financial, infrastructural, issues related to migrant labour, and the revival of the economy.
Historically, Bihar was part of the Bengal presidency. The quality of governance in this region was poor because of the inefficient zamindari system. A memorandum submitted by the then state government to the Simon Commission in 1930 rued the fact that per capita expenditure on health was much lower in the Bengal presidency when compared with the Bombay and Madras presidencies. Even within the Bengal presidency, expenditure on health was the lowest in Bihar, compared to other regions. Unfortunately, even after Independence, this trend continued.
The total public expenditure on health in Bihar is budgeted at Rs 8,788 crore (2020-21), which is 4.1% of the total budget. In per capita terms, public expenditure on health in Bihar is only Rs 690. In contrast, the corresponding figure in Kerala is three times that, at Rs 2,092. Health care infrastructure in Bihar is only one-fifth of the national average, measured in terms of hospital beds per 1,000 people. Bihar has not had any major infusion of funds to create the necessary health infrastructure for almost two decades.
Since the corporate sector is all but absent in Bihar, the responsibility for infrastructure development is mainly with the state government. But the state government can do little if its finances are chronically weak.
During the lockdown, there has been virtually no economic activity in Bihar, and the state government has not been able to generate enough revenue from taxes. Also, the state government has limited borrowing space, thanks to the 3% restriction of Gross State Domestic Product (GSDP), as prescribed under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. The state’s share in the central pool of taxes has been routinely reduced. This reduction amounted to Rs 14,796 crore in 2019-20. Under such severe financial constraints, the only source of funds is the Consolidated Sinking Fund (CSF) which was created in 2008. Due to the financial stress caused by the lockdown, the state government has had to withdraw Rs 1,000 crore from the fund. The current financial capacity of the state government is too limited to allocate adequate funds to strengthen infrastructure.
Another important aspect of Covid-19 is the problems faced by its migrant workers. It is estimated that around three million workers have gone to other states for work. The pandemic has left them stranded, without jobs or the wherewithal to return home. After considerable delay, the central government has now arranged for special trains, helping them to return to their homes. But once the lockdown is over, employing these migrant workers, either at home or their earlier places of migration, will be a serious challenge for the state government.
Finally, to face the challenges thrown up by the virus, the state government has to revive its economy. Although the economy has registered steady growth in the recent past, it is still weak because of the absence of a corporate or industrial sector on the one hand, and the dependence of a large majority of its workers on the low-productivity agricultural sector on the other.
The state government has to take the lead role in getting the economy back on track. The first component will be to provide purchasing power to the people, particularly the poor. Employment-oriented welfare programmes like Mahatma Gandhi National Rural Employment Guarantee Scheme are an obvious choice here, but there could be other programmes as well. Second, the state government has to provide substantial relief to kick start the micro, small and medium enterprises sector in Bihar, which has been badly affected by the lockdown.
Apart from tax concessions, such relief could also include input subsidies. This will put pressure on the finances of the state government. But the state government should not hesitate to borrow, even if it implies crossing the limit of 3% of the GSDP, as prescribed by the FRBM Act. Reaching out to nations such as Japan, South Korea and Thailand, which share a cultural bond with Bihar because of Gaya and the Buddhist legacy, should be encouraged.
The economy is facing an unprecedented situation and, as such, demands an unprecedented response. Bihar can meet this challenge but it will need all the support it can get from the central government.