Amid deep standoff between Centre and states, Budget bid to bridge divide

Following the presentation of the Budget, Opposition leaders were taken by surprise when PM Narendra Modi, after congratulating Finance Minister Nirmala Sitharaman, walked across the aisle and greeted them, enquired about the health of some senior TMC leaders, struck a conversation with an MP about being digital-friendly. Given the bitter political divide, this casual chit-chat stood out.

More so, when the Centre, in a set of initiatives in the Budget, reached out to states on capital expenditure, asset creation and infrastructure development.

This, amid a deep Centre-state standoff over a range of issues, from the use of investigative agencies to the proposed changes in cadre rules.

The government raised the outlay for ‘Scheme for Financial Assistance to States for Capital Investment’, made a commitment to work with state governments to cut time needed for approvals to push affordable housing; and moved to include infrastructure developed by state government under the PM GatiShakti National Master Plan.

“Reflecting the true spirit of cooperative federalism, the Central Government is committed to bolstering the hands of the states in enhancing their capital investment towards creating productive assets and generating remunerative employment…in deference to the requests received during my meeting with Chief Ministers and state Finance Ministers, the outlay for this scheme is being enhanced from Rs 10,000 crore in the Budget Estimates to Rs 15,000 crore in the Revised Estimates for the current year,” Finance Minister Nirmala Sitharaman said.

The government also launched a new scheme, Prime Minister’s Development Initiative for NorthEast (PM-DevINE), which will be implemented through the North-Eastern Council for funding infrastructure with an initial allocation of Rs 1,500 crore. “It will not be a substitute for existing Central or state schemes. While the central ministries may also pose their candidate projects, priority will be given to those posed by the states,” Sitharaman said.

For 2022-23, Rs 1 lakh crore has been allocated for states for catalysing overall investments in the economy in the form of 50-year interest-free loans, over and above the normal borrowing limit of 4 per cent of GSDP to the states.

“The outlay on Pradhan Mantri Gram Sadak Yojana is up by 27 per cent. In addition, it has been provided that if certain priority projects by some states have been identified, we will even take 40 per cent of state government’s (share in funding) so that states have no burden in carrying out these works. These are extremely labour intensive projects,” Finance Secretary TV Somanathan said.

For urban capacity building, support will also be provided to the states, the Finance Minister said. “Modernization of building byelaws, Town Planning Schemes (TPS), and Transit Oriented Development (TOD) will be implemented. This will facilitate reforms for people to live and work closer to mass transit systems,” she said.

Active involvement of states has also been sought for the next phase of ‘Ease of Doing Business 2.0’ and ‘Ease of Living’. The PM GatiShakti National Master Plan, the plan for infrastructure development, will also include infrastructure developed by the state governments.

For the aspirational districts programme, “95 per cent of those 112 districts have made significant progress in key sectors such as health, nutrition, financial inclusion and basic infrastructure”, Sitharaman said, adding that in 2022-23, the programme will focus on such blocks in those districts.

The government also brought in parity for state government and Central government employees by increasing the tax deduction limit to 14 per cent from 10 per cent on employer’s contribution to the National Pension System.

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