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Budget 2024: Are allies’ demands putting pressure on Modi govt? First Chandrababu and now Nitish made the demand?

Sagar Patel

By Sagar Patel

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Nitish Kumar and Chandrababu Naidu have made huge demands on the government in the budget.

The country’s Finance Minister will present the Union Budget on July 23. Even before that, a huge demand has come from the NDA’s two biggest allies. On one hand, Andhra Pradesh CM Chandrababu Naidu has demanded over Rs 1 lakh crore for Amaravati and some major projects. On the other hand, Bihar CM Nitish Kumar has also demanded Rs 30,000 crore from the Central government for the state. The Bihar government had put forward this demand during a pre-budget meeting with Finance Minister Nirmala Sitharaman last month.

According to those in the know, the government has received a request from Bihar, but it is yet to be decided how much budget will be allocated to the state this year. On the other hand, last week N Chandrababu Naidu of the TDP has already demanded over 12 billion dollars for the state of Andhra Pradesh in the coming years. What is special is that the combined demand of both the coalition parties is equivalent to more than half of the government’s annual food subsidy budget of Rs 2.2 lakh crore.

This is also required

However, the government might get some relief in this year’s budget. The main reason for this is the record dividend given by the RBI and the increase in tax revenues. Apart from this, both parties allied to the central government have demanded that they be allowed to borrow more in those states where they are in power. As per fiscal rules, state governments can only borrow up to 3 per cent of their region’s GDP. According to media reports, the Bihar government has requested to increase this limit by 1 per cent and the Andhra government has requested to increase it by 0.5 per cent.

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JDU’s demand for Bihar

Provision has been made in the current budget to build 9 airports, four new metro lines and seven medical colleges in the state. Funding has been sought to set up a thermal power plant worth Rs 200 billion. On the other hand, money has been sought for repair work on over 20,000 kilometres of roads. According to local media reports, Bihar has applied for special status, which will give the state preferential treatment in receiving funds and tax exemptions from the central government. However, the Finance Ministry and the Bihar government have not issued any official statement on the matter.

Center willing to reduce fiscal deficit

The government is scheduled to release its budget for the financial year to March 2025 on July 23, in which Sitharaman promised to reduce the federal deficit to 5.1 per cent of GDP. According to the IMF, the deficit for the last financial year, including the central and provincial budgets, was estimated at 8.8 per cent. S&P Global Ratings said last week that bringing the combined deficit below 7 per cent of GDP could lead to a rating upgrade.

When a package of Rs 1.25 lakh crore was received

India’s states derive most of their revenue from a share of tax revenues collected by the central government. Their borrowing capacity is also limited. In Modi’s first term, Bihar received a financial package of Rs 1.25 trillion for farmers’ welfare and improvement of roads, railways and airports. Both Bihar and Andhra Pradesh are facing financial strain, reducing their ability to spend on development projects. According to official data, Bihar’s spending on salaries, pensions and interest payments accounts for more than 40 per cent of state revenues. Bihar is one of the poorest states in the country, whose per capita income is estimated at around Rs 59,000 in fiscal 2023, less than half the national average.

Sagar Patel

Sagar Patel

I am Sagar Patel, specializing in business news reporting. With a keen focus on economic trends, market analysis, and corporate developments,

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