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Governance

Surge pricing in railways is Suresh Prabhu's deliberate self-goal

Union railways minister Suresh Prabhu’s latest move of “surge pricing fare system” is a gambit to reduce finance minister Arun Jaitley’s pain, who looks all set to soon adopt country’s messy public transport behemoth. If everything goes by the plan, the 93-year old Rail Budget would cease to exist from the next financial year i.e. FY […]Read More »

Why Vajpayee stands taller than Rao, Manmohan and Modi put together

In India, privatising a public sector company is perhaps a bigger challenge than contesting an electoral battle or even conducting a nuclear test. Don’t see it as an incongruous claim. This may well be a credible reality if one looks at the 25-year-long history of India’s economic liberalisation. In two-and-a-half decades of economic reforms, despite […]Read More »

Modi's war on black money is a let-down, amnesty schemes cheat honest taxpayers

If one pays his or her taxes honestly and does not expect any favours from the government, he or she has every right to show angst over this never-ending business of amnesties to tax swindlers. Prime Minister Narendra Modi repudiated history when he, during his last Mann Ki Baat, reminded people of the September 30 […]Read More »

Special Category for Andhra will remain elusive

In February 2016, Prime Minister Narendra Modi had assured the Andhra Pradesh Chief Minister Chandrababu Naidu that he would consider conferring the special category status to his state. Apart from this privilege, Naidu has been demanding a special package for the residuary state of Andhra Pradesh after it was carved out from the erstwhile composite […]Read More »

India needs a water-sensitive food trade policy

If one lists the nations most suited to produce wheat, sugarcane, cotton and soybean, China and Egypt will definitely stand atop on historical, geographical and climatic counts. World’s largest river Nile flows in Egypt which every year collects fertile soil from different countries in Africa and deposits it in its delta. On the other side […]Read More »

Modi sarkar and telcos have both hung up on the consumers

Do you get full signal on your mobile? Is your data speed fast enough? Have mobile companies started compensating you for call drops? If your answers are a resounding “no” (naturally, they would!) then, more than the government, we ourselves are responsible. We Indians, afflicted with a strange kind of amnesia, tend to forget the […]Read More »

Modi's foreign trips can wait. Indian trade needs emergency landing

Howsoever spectacular Prime Minister Narendra Modi’s diplomatic campaign might have been, the fact remains the void in the trade diplomacy has grown faster than ever. If the government’s own Economic Survey is to be believed, India’s foreign trade has gained momentum over the last decade with a flurry of free and preferential trade agreements signed […]Read More »

Modi sarkar should bet on services for dream growth

If one observes the samurais of growth driving the GDP rate above seven per cent, one wouldn’t find them in the swanky corporate offices of Mumbai and Delhi, but in the markets close to one’s home. These growth warriors make our lives easier by running eateries, repairing shops and providing dozens of similar services and […]Read More »

Don’t make India a circus of cartels and monopolies

Facebook’s Free Basics trial was so legendary that one Ganesh could double the yield from his fields with the knowledge FB-patented internet facilitated. While, advertisements are notorious for making lofty claims, this one goes beyond limit. Considering the state of agriculture in India, this can’t even be an exception let alone a norm. As it […]Read More »

Let’s fix the system instead of opting out

Allahabad High Court passed an interesting order last month, directing the Chief Secretary of Uttar Pradesh to ensure that from the academic year beginning 2016, children of all officials serving with the government, including judiciary, local bodies and representatives of people, must send their children to study only in government primary schools, failing which the […]Read More »

That is retrograde, Mr Jaitley

An important step in clearing our institutional financial system of the cobwebs it has gathered over the years has now been reversed, with Mr. Arun Jaitley announcing deferment of his plan to set up an independent public debt management authority, which he had promised in the budget presented earlier this year. Till now, Reserve Bank […]Read More »

Coalgate Revisited

  The auction of 33 of the 204 coal mines, whose allocations were cancelled by the Sup¬re¬me Court, has just been completed. The auction has brought the government a ‘windfall gain’ of Rs 2.07 lakh crore for 19 operational blocks and 13 about-to-open blocks which were put under the hammer, against Rs 1.86 lakh crore […]Read More »

Will Federalism at Work Let Populism Thrive ?

The just released recommendations of the Fourteenth Finance Commission’s will have far- reaching consequences for the states of the Indian Union, with 42 percent of the central divisible pool of resources now going to them, as compared to the existing 32 percent provided by the Thirteenth Finance Commission. In terms of resources now available to […]Read More »

Special Category for Andhra will remain elusive


In February 2016, Prime Minister Narendra Modi had assured the Andhra Pradesh Chief Minister Chandrababu Naidu that he would consider conferring the special category status to his state. Apart from this privilege, Naidu has been demanding a special package for the residuary state of Andhra Pradesh after it was carved out from the erstwhile composite state in June 2014, and an additional Rs 16078 crore to bridge the budget deficit arising from the bifurcation of the State. The Special Category Status allows a state to avail Central funding on liberal terms for the centrally sponsored schemes (90 per cent grant and 10 per cent loan), apart from various tax sops and incentives to industries.

_NAIDU-MO

The erstwhile composite state of Andhra Pradesh was divided with effect from 2  June 2014, by the Andhra Pradesh Reorganisation Act, 2014. Of the 23 districts of undivided Andhra Pradesh,  nine  in the coastal region and four in the backward Rayalseema region remained with the residual state of Andhra Pradesh, while the remaining ten  including the most prosperous Hyderabad district with the capital city of Hyderabad and the contiguous Ranga Reddy district, also equally prosperous, went to Telangana. As per the Act, the total liabilities of the undivided state were to be shared by the two successor states in the ratio of their population, i.e. 58:42.

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The division had left the residual state of Andhra Pradesh much poorer. As per the 2012-13 accounts, the residuary Andhra Pradesh with its own revenue of Rs 11,627 crore and expenditure of Rs 60,750 crore had inherited a total liability of Rs 90,910 crore, while Telangana with revenue of Rs 56,476 crore and expenditure of Rs 42,376 crore inherited a debt liability of pnly Rs 65,832 crore. But the asymmetry in the whole arrangement becomes striking, once we consider that the combined revenues of the two prosperous districts of Telangana, Hyderabad and Ranga Reddy, were Rs 51,478 crore, or 91 per cent of the total revenues of Telangana. These  two districts together accounted for expenditure of Rs 23,302 crore or 48 per cent of the total expenditure of Telangana during 2012-13. It was anticipated that this would lead to increased impoverishment of Andhra Pradesh as its own revenue would be too inadequate to meet even one-fifth of its expenditure requirements. The huge debt inherited in addition would impose a further heavy repayment burden on the poor state, and consequently stymie its growth with gaping fiscal deficits. Given the need to establish a new capital at Amaravathi, according a special category status giving it access to liberal Central aid at least for the first few years thus seemed imperative.

The latest accounts of the Government for the first completed year 2014-15 after its formation, placed in the Legislature last month has, however,  allayed these fears to some extent. The state’s revenue did drop from Rs 1.10 lakh crore in 2013-14 when it was undivided to Rs 90,672 crore in the full year 2014-15, while its expenditure had gone up from Rs 1.10 lakh crore to Rs 1.14 crore. This left a revenue deficit of Rs 24,194 crore and a fiscal deficit of Rs 31,716 crore for 2014-15, in which the contributions of the last ten months of the state’s existence as a residuary state were respectively Rs 13,777 crore for the revenue deficit and Rs 20,745 crore for the fiscal deficit. In contrast, Telangana had a revenue surplus of Rs 369 crore and  fiscal deficit of only Rs 9,410 crore for these ten months. of course the higher revenue deficit and hence the higher fiscal deficit of Andhra were partly the state’s own creation; in fulfilling its election promises, it waived the agricultural loans of farmers to the extent of Rs 7,070 crore and increased the amounts under Indiramma Old Age and Disabled Pension Scheme to Rs 3,344 crore, which together accounted for 76 per cent of its revenue deficit of Rs 13,777 crore. The previous year, the composite state had a revenue surplus of Rs 344 crore and a fiscal deficit of Rs 18,041 crore.

The revenue of a state comes partly from its own resources and partly from Central transfers that includes the state’s share in the divisible pool of Union taxes, besides Central grants. As a result of the bifurcation, during the ten months of its existence as a residuary state, Andhra’s own revenues, tax plus non-tax combined, from its 13 districts amounted to Rs 38,038 crore. The central transfers, including the state’s share in the divisible pool and Central grants, amounted to Rs 27,657 crore, bringing the total revenue to Rs 65695 crore during the period, against which the revenue expenditure was Rs 79,471 crore, leaving a deficit of Rs 13,777 crore in the revenue account, even with the election-promised sops.  In contrast, the total own revenues from Telangana’s  ten districts were almost the same as Andhra’s (Rs 35,735 crore), which means the loss of Hyderabad and Ranga Reddy districts did not affect Andhra’s revenue position as drastically as anticipated — in fact the total revenue receipts of Andhra exceeded that of Telangana by over Rs 14,600 crore, though it was because of the Central transfers, in which Telangana’s share was only Rs 15,306 crore compared to Andhra’s Rs 27,658 crore. Andhra commands a larger share in Central transfers, partly due to its higher population  which  has 25 percentage weightage in the divisible pool transfers.

Instead of total expenditure, per-capita developmental expenditure is a better and more reliable proxy for actual expenditure spent on development. Andhra, with 2011-population of 4.9 crore, had a per capita developmental revenue expenditure of Rs 12,226, and per capita capital outlay of Rs 1,331, making up the total per capita developmental expenditure of 13557. In contrast, Telangana with population of 3.52 crore had a per capita developmental revenue expenditure of Rs 10,340 and per capita capital outlay of Rs 2,379, making up a total of Rs 12,719, which was lower than that of Andhra.

In the context of the  financial results of the State, it thus seems improbable that Andhra Pradesh is getting the special category status anytime soon. While replying to the debate on the Andhra Pradesh Reorganisation Bill in Parliament during the last days of UPA-II, the then Prime Minister Manmohan Singh had assured that the resource gap likely to arise in the successor state of Andhra Pradesh in the very first year would be compensated in the regular Union Budget 2014-15. The new Government, apart from flagging the issue to the Niti Aayog which apparently had submitted its report, has not yet taken any concrete step so far on this promise. Special category status could have helped in attracting industries into the state by creating a congenial ecosystem for industrial growth through tax incentives. As of now, industries seem more interested in setting or expanding their units in Hyderabad which is in Telangana rather than in Amaravathi, which is not yet ready. In fact readying it would need massive capital investments and resources, which the state lacks presently. It  remains to be seen if Chandrababu Naidu succeeds in getting at least some assistance from the Centre towards this end.

The writer is a senior civil servant. The  views are personal and not the government’s.

Finance

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4 disastrous effects of demonetisation that Modi ignored

In spite of several inefficiencies, fortunately, India never witnessed a bank-run or monetary crisis parallel to the scale in Europe or America. However, the chaos and long queues that engulfed banks across India now perfectly mirror the plight the Greeks faced last year, albeit for different reasons. Demonetisation is a rudimentary monetary instrument of the […]Read More »

Modi's historic move against black money brings chaos now, gains later

While Prime Minister Narendra Modi’s unprecedented move to temporary demonetise Rs 500 and Rs 1,000 notes is expected to bring in a host of positives, it will also set off major administrative and logistical challenges at the outset, not to mention the plight of common people. The government and Reserve Bank of India (RBI) will […]Read More »

Diwali or not, India can't boycott Chinese goods

Last fortnight, close on the heels of the rise of firecracker nationalism against Chinese goods on social media, Reserve Bank of India (RBI) was busy making adjustments for yuan’s entry into India’s foreign exchange reserves. Not only RBI, most of the global central bankers too had to alter metrics of their forex reserves after yuan’s […]Read More »

Despite $10 billion in tax net, Modi sarkar's amnesty is a colossal failure

Despite the long history of failed tax amnesty schemes, the Narendra Modi government tried its luck with tax pardons, but to no avail. Howsoever pliable the statistics might be, the fact remains that declarations of Rs 65,250 crore under the black money disclosure scheme could attract just a moderate success for the NDA government. However, […]Read More »

Modi must walk the talk on GST

Even if one doesn’t buy everything that Prime Minister Narendra Modi claimed in his Parliament speech on Goods and Services Tax (GST), one should acknowledge that this is one of the most crucial structural indirect tax reforms in the last 25 years of liberalisation. This may not effectively clamp down on inspector raj, or turn […]Read More »

GST Bill an example of half-baked and vague reform

Contrary to the euphoria and costlier-cheaper headlines, the Constitution (122nd Amendment) Bill 2014 doesn’t spell out even the outline of the GST that India is expected to get in the future. The passing of the GST Bill is just the beginning of a tedious political and operational voyage that should ultimately result in the implementation […]Read More »

Raghuram Rajan, darling of Dalal Street, ‘devil’ for Delhi Durbar

  Sometimes words speak louder than actions. If nowhere, then at least in India. RBI chief Raghuram Rajan has fallen victim to his own candid words (read speeches) on issues of political import. However, his legacy doesn’t lie in his articulations as a blunt economist but as a top-class, innovative and professional central banker. And here […]Read More »

5.80 lakh crore in bad loans: Let's pray for India's bleeding banks

The Rs 13 lakh-crore pile of bad loans of India’s public sector banks now amounts to more than the GDP of countries like New Zealand, Kenya, Oman and Uruguay. A new IMF report states Indian banks are in a poor state compared to the notoriously messy banking of China.The financial results of major public sector […]Read More »

Modi government has actually worked hard to deliver on black money

  After facing severe criticism for its lofty electoral promises on bringing black money to India, Modi sarkar appears to have stuck its neck out on dealing with the issue. The Modi-led government, running past the two-year mark in office, has taken some calculated risks to go ahead on curbing black money. To promote transparency, the government […]Read More »

How India's wealthy are milking billions off subsidy

Do you think the politics of subsidy is only confined around lower and middle economic classes? If yes, then you would wonder how subsidies worth rupees one crore go into the pockets of the rich every year, and that too via merely seven products and services. The subsidy bill may notch up if one takes […]Read More »

India’s three-tiered economy needs bottoms-up approach

Has finance minister Arun Jaitley got it right? If one looks at the economy at hand, the answer would possibly be “Yes”. India is now a three-speed economy.  Double-digit growth is confined to a section that comprises sectors such as e-commerce, travel and stock markets and accounts for 30 per cent of the GDP. Another […]Read More »

India’s Trade Gloom

  Not many years have ended with gloomier prospects for Indian trade. The gloom is not just because of the contraction in exports for 12 months in a row. It is also because India’s role and participation in global trade is becoming increasingly insignificant. The insignificance was evident from the approach to the Nairobi Ministerial. […]Read More »

Budget 2016: Modernising rural economy must be Modi's mission

Last fortnight, when Prime Minister Narendra Modi mentioned crop insurance in his Maan ki Baat programme, people well aware of the state of agriculture justifiably grew anxious. This was not because government’s efforts do not inspire or encourage, but because in spite of three crop failures, Indian politicians are still handling farming with a mindset […]Read More »

Can India finally see a Modi Budget in 2016?

When existing steel companies are already reeling under distress owing to falling demand, why is the Union government going to establish new steel companies in the public sector? What is the need for forming new banks (monetary banks) to provide loans to small companies when several financial institutions of the government are already doing this? […]Read More »

How many more taxes do we need to pay?

Public memory is usually short but the memory of taxation is even shorter. Benchmark brent crude might have tested an unprecedented low of $37 per barrel, but domestic petrol and diesel prices are still ruling higher thanks to heavy taxes. If only the debate on goods and services tax (GST) revolved around explaining this dichotomy, […]Read More »

Is weak rupee still a national shame for PM?

Whether India draws an economic advantage from the ongoing global turbulence or not, a substantial political advantage can definitely be churned out at the moment. It is time for our leaders to rid themselves of their unfounded misconception on the exchange value of the domestic currency, that is, the rupee. In India, the BJP and […]Read More »

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