With the elections over, Bihar’s finance department will have to pull out the spreadsheets to redo the fiscal arithmetic as the govt will have to raise resources to not just meet the big promises made in the NDA manifesto, including more money to the 74 lakh farmers, SC students and others in the state, but also to fund capital expenditure (capex) to build two greenfield cities (New Patna and Sitapuram) and create farm infrastructure.In a state with an estimated fiscal deficit of 9.2% of gross state domestic product (GSDP) last year and own-tax revenue budgeted at 5.3% of state GDP this year, there is chatter of a review of prohibition imposed by Nitish Kumar in 2016. Getting the NDA to reverse the ban may not be easy as it has a lot of appeal with women voters who are pro-prohibition.But there is a large revenue potential since the state govt was earning over Rs 3,000 crore annually from alcohol sales in 2015-16 – more than enough to cover the Rs 2,200 crore needed for additional direct transfer to farmers. At current prices, the mop-up will only be higher.In any case, the pre-poll announcement of Rs 10,000 for the currently enrolled 1.5 crore women under the Mukhyamantri Mahila Rozgar Yojana will cost Rs 15,000 crore. Besides, an increase in the monthly pension to Rs 1,100 for 1.1 crore elders, widows and disabled will result in an additional outgo of around Rs 8,500 crore with nearly Rs 4,000 crore likely to be provided for free electricity of up to 125 units. The bill will go beyond the additional Rs 28,000-crore outgo due to the schemes already implemented. After all, the NDA manifesto promises Rs 2,000 assistance to SC students in colleges and support to fisherfolk (see graphic).As a result, Bihar is unlikely to close the financial year with a budgeted fiscal deficit of 3% of state GDP this year, unless it can reduce other expenditure or raise resources from new sources.After all, with 60% of the expenditure already committed to interest payments, salaries and pension and other establishment-related spending, there are few options.
