While the central government is trying to jumpstart growth and fix the country’s yawning infrastructure deficit by speeding up investment in roads, railways and infrastructure—and now the PM Awaas Yojana and Swachh Bharat—there are enough instances of projects that are not getting off the ground due to slow land acquisition or the inability to get various state government clearances like right-of-way for telecom projects or shifting-of-utilities in the case of road projects. The prestigious Delhi Mumbai Industrial Corridor Development Corporation which had ambitious plans to develop cities and was funded by low-cost Japanese aid, for instance, is progressing very slowly with various state governments unable to deliver on their promise to acquire land fast enough and in the required quantities. To that extent, allocating such projects only to those states that are able to provide clearances fast is the perfect solution since projects will take off and get completed on time, and the economy needs the additional spending.
The problem with this, however, is that it goes against the principles of India’s federal structure. Right now, though richer states like Maharashtra and Gujarat contribute more to the government’s tax kitty, it is poorer states like Bihar that get a bigger share of annual tax devolutions. If devolutions were based on tax contributions, the richer states would get more, and the poorer states would never have the money to create the necessary infrastructure or social spending capacity—on education or health facilities for citizens—required to lift themselves out of the morass they are in. By and large, therefore, the devolution of central taxes is based on the policy of social equity and the need to help the poorer states.
What the Centre has proposed, going by a story in this newspaper, is a happy medium. A certain share of central government spending on infrastructure, 20-30%, is to be given to states that are quick to give the necessary clearances and to acquire the land required for the project. This will ensure that a Bihar or a Jharkhand get their fair share of infrastructure projects in roads, railways or irrigation and even low-cost housing where concessional finance is available, but if they want more, they have to ensure clearances are quick; else, an Andhra Pradesh or a Gujarat or a Tamil Nadu walks away with it. While retaining the basic structure of a higher devolution of central taxes to poorer states, even the finance commission tried to build in benefits based on efficiency—under this, a certain share of central devolutions was based on the state’s fiscal health; the more fiscally prudent states saw a certain rise in their devolution share because of this.