The support extended to Bihar and Andhra Pradesh in the Union Budget 2024-25 is vital irrespective of political gain, Neelkanth Mishra, Chief Economist at Axis Bank said. In an interview with Moneycontrol, Mishra praised the budget's allocation for these states as an essential step for national development.
While the central government's ability to favour certain states is now restricted, it can still influence national infrastructure projects. Mishra said that Bihar, in particular, needs more national highways to support national growth. "As a Bihari, I must say, Bihar does need a lot more of national highways. You can't have India grow if UP and Bihar are lagging behind," he noted.
The Union Budget 2024-25, presented by Finance Minister Nirmala Sitharaman on July 23, prioritised infrastructure development for Bihar and Andhra Pradesh, addressing the needs of National Democratic Alliance (NDA) allies - the Telugu Desam Party (TDP) and the Janata Dal United (JDU). Sitharaman announced an allocation of Rs 15,000 crore for the development of Amravati, Andhra Pradesh's capital, and revealed plans for new airports, medical colleges, and sports infrastructure in Bihar.
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Additionally, Rs 26,000 crore has been earmarked for highways in Bihar.
Mishra said that the Fourteenth Finance Commission had removed special category status aimed to prevent central governments from misusing fiscal leeway to favour coalition partners. "Dr. Y.V. Reddy, who chaired the 14th Finance Commission, was concerned that central governments could misuse the special category status to favor some coalition partners," Mishra explained.
In 2015, the 14th Finance Commission removed the differentiation between general category and special category states in the distribution of shareable taxes. It raised the portion of net shareable taxes allocated to states from 32 percent to 42 percent for the 2015-2020 period.
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On July 22, the Centre rejected the JD(U)’s request for special category status for Bihar during the all-party meeting. No new states are being awarded 'special category' status at present, as the Indian Constitution does not accommodate such classification.
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