A Big Win For Allies: The Politics Of NDA 3.0 Government’s First Budget

One of the big announcements in Finance Minister Nirmala Sitharaman’s first budget for NDA 3.0, was a shower of schemes for the two allies on whose strength the National Democratic Alliance was able to reach the halfway mark in the Lok Sabha. 

The two states together had reportedly demanded over Rs 1.30 lakh crore from the Centre besides a number of other concessions including grant of special status to the states which would have helped garner more funds and attracted lower taxes.

While the Centre had made it clear that special status could not be given to any new states besides the vulnerable Himalayan and northeastern states which already enjoyed it, Sitharaman was in the words of many, “more than generous in showering goodies on the two chosen states”.

Naidu Power

On Tuesday, the Finance Minister announced that Rs 15,000 crore in funds would be made available for this fiscal year for the development of Naidu’s dream project – the new capital city of Andhra Pradesh — Amaravati, tapping into multilateral funds.

More funds will also be made available in the years ahead for this new planned city.

The announcement came while presenting the Union Budget 2024-25 in the lower house of Parliament. Sitharaman also promised to help fund another Naidu pet project – the Polavaram multi-purpose irrigation project.

She topped it up by including Andhra in a special ‘Purvodaya’ scheme for eastern states which would cover human resource and infrastructure development and generation of economic opportunities in the states of Bihar, West Bengal, Odisha and Andhra Pradesh.

The transition of coastal Andhra into the eastern region sans Chattisgarh and Telangana, its neighbours may raise some eyebrows but can be viewed from a stratagem to give funds to the two target states under a scheme that has been ostensibly created to help out not-so-well-off hinterland states. 

Funds will also be provided for essential infrastructure - water, power, railways and roads - in the Kopparthy node on the Vishakhapatnam-Chennai Industrial Corridor and Orvakal node on Hyderabad-Bengaluru Industrial Corridor.  While, grants for the backward regions of Rayalaseema, Prakasam, and North Coastal Andhra, as stated in the Andhra Pradesh Reorganisation Act, will also be provided.

Naidu made a come-back in his home state of Andhra Pradesh by winning a majority in the state legislature and 16 cruicial Lok Sabha seats. He has with this emphatic win, emerged as a crucial ally of the BJP, along with Kumar with his round dozen Janata Dal (United) MPs in the lower house.

The two regional parties together account for nearly 10 per cent of the total strength of 292 that the NDA enjoys in India’s equivalent of the House of Commons.   

Jai Bihar !

Besides the Purvodaya scheme to help eastern states which will certainly assist Bihar, the state which was so vital for the NDA’s victory,  will straight away gain a huge corpus of Rs 26,000 crore to build road connectivity projects, which will include (i) Patna-Purnea Expressway, (ii) Buxar-Bhagalpur Expressway, (iii) Bodhgaya, Rajgir, Vaishali and Darbhanga spurs, and (iv) additional 2-lane bridge over river Ganga at Buxar.

For a state government which has suffered the ignominy of witnessing the collapse of a dozen bridges in a short span of just 17-days during the ongoing Monsoon, the projects are a huge Manna from heavens, politically. 

Bihar has also long and bitterly complained of the lack of industries in the state since the bifurcation of the province, which gave away the mineral-rich areas and industrial towns to Jharkhand.  

In fact, one of Bihar’s former chief ministers had once famously said that after the division of the state, all that was left with was “baad aur sukha”(floods and drought). 

As an answer to that, an industrial node has been proposed at Gaya, which falls on the golden quadrilateral of highways and is a link town between Kolkata in the east and Amritsar in the northwest. Besides, it has been promised that requests of the state “for external assistance from multilateral development banks will be expedited”. 

At the same time to address the complaint about floods, the finance minister today also announced Rs 11,500 crore in spending for projects such as the  Kosi-Mechi intra-state link and 20 other ongoing and new schemes including barrages, river pollution abatement, and irrigation projects.  

Besides, a promise for future steps to control the floods of the river Kosi was also extended.

A temple corridor project will also be launched in Gaya similar to the one in Varanasi which will develop the area around Vishnupad Temple at Gaya and Mahabodhi Temple at its twin city of Bodh Gaya.

Rajgir and Nalanda associated with the Mauryan period will also be developed as tourist centers.

Increase in Borrowing Limits?

It is to be seen whether another key demand, to raise the borrowing limit by both states, beyond the ceiling of 3 per cent of state GDP, will be addressed by the 16th Finance Commission which is currently holding meetings to decide on their award. 

The demand for a hike in borrowing limits is a popular one. In fact, the opposition-ruled Tamil Nadu, Kerala, and Karnataka have been raising similar demands for some time now. 

There is a logic to the demand too, as the combined expenditure of states on social services including health and education during 2022-23 stood at a hefty Rs 19.18 lakh crore. Compared to this spending by the states, the central government spent just Rs 2.23 lakh crore on these heads during the same period. 

The states thus spent some  8.6 times the money spent by the Central government on services that matter most to ordinary people. Economists and opposition leaders have been arguing that states given that their ability to tax is very limited must therefore have the right to borrow.  

However, the problem of course lies in the fact that state public finances are not exactly in a healthy state. States’ debt to GDP has been rising and a dozen states, including Bihar, Andhra, Kerala, West Bengal, and Uttar Pradesh had debt-GDP ratios ranging from 30 per cent to 53 per cent in 2023-24.   

If the Centre is keen to cut down on its fiscal deficit which is expected to drop down to 4.9 per cent of GDP this fiscal, it will expect states to also tighten their belts. The future will unfold how the give and take on this score will play out in the days ahead.