Experts see a method in RJD leaving finance for JD(U), swapping for education

This assumes importance, as the financial condition of the state is far from satisfactory at this point of time due to growing burden of loan, with outstanding debt almost the size of the state budget, fall in GST collection despite growth in other states, poor revenue generation, likely impact of poor monsoon on agriculture and apprehension about less than friendly Central approach.

In the first cabinet expansion of Nitish Kumar-led Grand Alliance (GA) government on Tuesday, two significant things have happened, and they directly point to the challenges before the new dispensation, which will have the pressure of keeping its promises, especially on the job front.

Bihar CM Nitish Kumar interacts with new cabinet ministers in Patna on Tuesday. (Santosh Kumar/HT Photo)

First, Kumar’s JD-U has parted with the education department for the first time. It is one portfolio that always remained with the party since it came to power 2005 and despite criticism over rapid slide in education — be it in the schools or the troubled state varsities — it continued with it. This time, education has gone to RJD leader Chandrashekhar.

Second, for the first time, JD-U gets the key finance portfolio to handle, which always remained with the allies — mostly with BJP or RJD for some time after 2015 when Abdul Bari Siddiqui was the department minister. Now, former education minister Vijay Kumar Choudhary from JD-U has got the finance portfolio.

This assumes importance, as the financial condition of the state is far from satisfactory at this point of time due to growing burden of loan, with outstanding debt almost the size of the state budget, fall in GST collection despite growth in other states, poor revenue generation, likely impact of poor monsoon on agriculture and apprehension about less than friendly Central approach.

Sudhanshu Kumar, economist & associate professor, Centre for Economic Policy and Public Finance (CEPPF), Patna, said with the political realignment, there is a buzz about providing large-scale government jobs in Bihar, while managing the finances in an underdeveloped state where revenue from its own sources remains extremely limited is the most challenging task for any government.

“In addition, the issue of equal pay for a similar amount of work in the government departments has been a critical political agenda of the new alliance partner in the government, the RJD. The issue of providing 10 lakh government jobs was raised frequently during the election, and it is said that RJD benefitted from keeping this issue alive during the assembly elections of 2020. But now being in power, everything will depend on the finance department, which JD-U always left with its alliance partner in the past. But RJD apparently knows the challenges of finance, which cannot be tackled in a short period in a state like Bihar, and hence left it to the experienced partner to handle,” he said.

As per the finance department figures, the state government could generate only around 25% of the total revenue from its own sources in the last five years. The state’s revenue from its own sources was ₹36,543 crore in 2020-21. Compared to this, the grants-in-Aid from the central government was ₹31,764 crore, which is significant. The total revenue receipts of the state government was ₹1,28,168 crore in 2020-21. Add to this, the GST compensation for the states with lower revenue growth has ended. In addition, the revenue from the state GST declined in Bihar in May 2022 when it registered an increase in many of the states in India.

“The expected fall in revenue highlights the difficulties in maintaining a high level of expenditure and makes it difficult to open new avenues of government expenditure. With this composition of revenue receipt, any additional financial burden will be difficult to fulfil. The difficulties in managing fiscal resources are also reflected in the delayed payment of salaries for the various government employees, both regular and on contract. Although vacancies remain in various state government departments for a long time , the limited financial capacity has always been considered a constraint. For additional job opportunities, increased private investments is the best option,” said another economist, who did not want to be quoted.

As per the report of the Controller and Auditor General (CAG) of India on Government of Bihar for the financial year ended March 2021, which was tabled in the Vidhan Sabha on June 30 this year, 82.94% of the borrowed funds were used for discharging existing liabilities in the state during 2020-21 and could not be used for capital formation/development activities of the state.

This could have direct bearing on the education department budget, as is already visible in terms of delay in salary disbursement to schoolteachers appointed in February itself. The challenge will grow further and needs finances to cater to the government announcements for jobs, as education is the only sector with main potential for job creation.

Social analyst and president of the Bihar Economic Association, Prof NK Choudhary, said leaving finance was not an ordinary move on part of the RJD, as it reflected its long-term planning and vision. “It is tactical move, knowing the true financial condition of the state, which will not give enough room to the state government to do what it will like to prepare ground for the 2024 parliamentary election. RJD has promised a lot, but everything will require money. So, they have cleverly washed their hands of the portfolio to put all the blame on the JD-U for not being able to do what it wants. Else, why should one leave finance portfolio, which is key to all departments and education cannot be a compensation for this. This does not augur well for the alliance, as it may develop the same symptoms that the NDA suffered from over a period of time with blame game,” he said.

Former director of AN Sinha Institute of Social Studies, DM Diwakar, said there was clearly a strategy on part of the RJD to stay clear of finance department.

“The precarious financial condition of the state means it will have to be managed in face of growing adversities, which includes a possibly less friendly Centre. Even in GST, the state is witnessing negative growth. Internal resources are poor. There is not much the state can do in a short period to augment finances, except managing by cutting expenditure in one direction to pay in the other. So, RJD being in dictating position this time has wisely left it for the JD-U to do the management part, while it could focus on increasing its mass base through education and health, where prospects of job creation are the maximum,” he said.