Arthashashtra written and compiled by the genius of a tradition on statecraft thinking in the 4th century BC of Ancient India in the mighty land of first empire of Indian subcontinent has been and is being continuously used world over as one of the greatest all time work on STATECRAFT . The modern great powers have used Arthashashtra in their modern statecrafting particularly in their foreign policy. It is tragic to see even in general the general decline of the land of Mighty Empire but even more tragic to see its economic sickness.
Arthashashtra unequivocally proclaims that ARTHA is the greatest even amongst the four great Aims ( Purushartha ) of human life. It goes on to establish that “those whose Artha is lost, their Dharma too is lost.” Even though Dharma enjoys greater status in the hierarchy of famous four Purushartha , yet “ Artha is the foundation even of Dharma”. If Artha is lost, it may become almost impossible to prevent the decline of Dharma. Koutilya is timeless Modern. In the tradition of overly metaphysical thinking of India, Koutilya has necessitated by the historic circumstances of his time reconstructs the Great Goals of life in the context of building VIJIGISHU RAJYA (INFALLIBLE AND EVER CONQUERING STATE) !
What is true for individual life in the attainment of great Purushartha is also true for the life of State, an ideal type like Maxwebber did. The ideal type of Koutilyan state is VIJIGISHU RAJYA. But constituting and maintaining such a state requires 7 organs of state, most vital amongst them all being the King. However the king can take it forward only when his KOSHA (CONSOLIDATED FUND OF THE STATE) is “ever increasing “! In the absence of an ever expanding and growing KOSHA King would fail in maintaining that critical civil services, espionage system and armed forces which can help him realise the goal of VIJIVISHU RASHTRA.
For maintaining that ever increasing KOSHA King must not leave any stone unturned to “excavate as many mines and found as many industries in his state as possible. But he must bring all such rich tax paying economic activities under the system of taxation without which Kosha can not prosper. “Koutilya is for a heavily centralised tax revenue based economy which though may not be completely in sync with contemporary neo liberal conception of lesser taxation to allow entrepreneurialism to grow yet the role of a credible sound tax revenue based state is endorsed even by neo liberals. If State has to keep it’s most fundamental promise of guaranteeing security of its people and steer the general economy, even if not running the economy by neo liberal standards.
The world has learnt greatly from Arthashashtra except the very contemporary rulers of ancient VIJIGISHU RASHTRA – MAGADH ! If we study the ARTHASHASHTRA of present day Magadh that is Bihar, it is disheartening to see that this land of the science of STATECRAFTING based on the Realistic Principles of political economy is quagmired itself in regressive political economy.
ARTHASHUNYA- THE TRAGIC ANTITHESIS OF ARTHASHASTRA
78 % of Bihar’s annual receipts come from Centre! 49% from central taxes and 29% as grants from centre. 49+ 29 = 78 %. Only 22 % of its total receipts is from states own sources.
Receipts
In 2021-22 Total revenue receipts for 2021-22 are estimated to be Rs 1,86,267 crore, an annual increase of 22% over the actual receipts in 2019-20. Of this, Rs 40,555 crore (22%) will be raised by the state through its own resources, and Rs 1,45,712 crore (78%) will come from the Centre. Resources from the Centre will be in the form of the state’s share in central taxes (49% of revenue receipts) and grants (29% of revenue receipts).
Devolution:
In 2021-22, receipts from the state’s share in central taxes are estimated to be Rs 91,181 crore, an annual increase of 20% over 2019-20. However, as per estimates under the Union Budget 2021-22, Bihar will receive Rs 66,942 crore as devolution in 2021-22 (27% less than the estimate under the state budget). Such a significant variation in the estimate may need the state to cut back the expenditure planned for 2021-22 at a later stage. In 2020-21, devolution is estimated to be 13% less than the budget estimate. The Union Budget 2021-22 estimates the devolution to states in 2020-21 to be 30% less than the budget estimate. Hence, the revised estimate for 2020-21 under the state budget could also be an overestimate.
State’s own tax revenue:
Total own tax revenue of Bihar is estimated to be Rs 35,050 crore in 2021-22, an annual increase of 8% over 2019-20. The growth rate for own tax revenue is estimated to be lower than the growth rate for GSDP (11%). Hence, the own tax to GSDP ratio is estimated to decline from 4.9% in 2019-20 to 4.6% in 2021-22.
SOURCES OF BIHAR’s OWN TAX REVENUE
|
1 |
SALES TAX / VAT |
20,800 CRORE |
|
2 |
STAMP DUTY AND REGISTRATION FEES |
4,700 CRORE |
|
3 |
TAXES ON VEHICLES |
2,500 CRORE |
|
4 |
LAND REVENUE |
500 CRORE |
|
5 |
TAXES ON ELECTRICITY |
250 CRORE |
|
6 |
GST COMPENSATION GRANTS |
3,500 CRORE |
|
7 |
GST COMPENSATION LOANS |
3,905 CRORE |
The major source of revenue for states obviously has been State GST that is inclusive of majority of indirect taxes. In case of other states like Maharashtra , Tamilnadu , UP , Gujrat State GST stands at 95,000 crore , 85,000 crore , 76,000 crore and 72 ,000 crore respectively. But in case of Bihar it is meagre 21,000 crore ! A poor tax revenue collection of 4,700 crore shows the poor land conversion for industrial purposes, as such reflective of poorest industrial activities amongst largest states of India. Other taxes like land revenue etc are so poor a source! A larger source of tax revenue, around 10,000 crore, that has been forgone due to prohibition was excise duty on liquor!
But where is the actual gap in Bihar’s tax revenue? That is GST. Which is reflective of vibrant industrial, commercial, trade and business activities? A poor GST revenue of mere 21 thousand reflects how poor the industrial, commercial, trade and business activities are in Bihar ! It is reflective everything that Bihar stands for – not only traditionally backward industries but also overall poor trade, commerce, business activities. Higher the GST revenue, higher must have been the trade, commerce, business and entrepreneurship. Poorer GST reflects poorer trade, business and commerce. It reflects that such a society must be Agriculture dominated and backwardness in the value addition in Agriculture sector as well. Wherever there is value addition in agriculture that implies there is stronger presence of food processing industries! Food processing industries must be adding to GST ! But since GST is poor, it proves lack of value adding food processing industries even in agriculture sector, showing that agriculture must be in primitive form, dominated by crop farming ! If we aim at GST revenue of Bihar at 60,000 crore, what do we need to do to expand the economic activities?
WHY THE ‘KOSHA’ OF BIHAR IS EMPTY
Strength of KOSHA of any State is proportionate to its GDP. If Kosha is weak, it implies GDP is weak. GDP weaker means – structural backwardness and sectoral imbalance. However, all these weaknesses according to Arthashashtra are nothing but weaknesses of KING – implying leadership in present context.
Though Bihar statistically falls within top growing States yet this high rate of growth is more reflective of narrow base of economy rather than growth of a mature and diversified economy. It is the growth of few sub sectors like construction and low productive services.
A State with the population size of 12 crore should minimum be generating a per annum GST of 50,000 crore going by India’s average national standard. But Bihar’s GST annual collection is 21,000 crore ! 30,000 crore less than the minimum! Other taxes or non tax revenues are almost missing or negligible.Land prices being one of the highest in India in Bihar, yet stamp duty only of 4,700 crore proves that commercial conversion of land is minimal. UP has stamp duty collection per annum of 32,000 crore, 6 times higher than Bihar, while UP’ s population is only double of Bihar ! What does that reflect? It reflects the dynamic relationship between land and industrial – commercial activities. Less stamp duty implies less economic activities.
Other non tax revenue sources are completely absent in Bihar’s income receipts. All these are reflections of an economically stagnant region. It reflects an agrarian society which requires huge subsidies and other welfarist expenses. Expenditures are mostly non productive and welfarist. That is exactly the symptom of a declining state, antithetical to the state Arthashashtra prescribed in the same land .
Concluding, Bihar’s economy is a sectorally imbalanced dominated by an agrarian primitive service type sector keeping pace with a saturated society with lesser scope of mobilities. However the youths of such a society yearn for mobilities both social economies.
BUILDING STRONG KOSHA FOR A VIJIGISHU BIHAR
King (CM) has to be spirited at rebuilding Arthashashtra’s state in the same land. Bihar has been the victim of non Koutilyan leaders. Trained and pledged falsely in outdated socialistic fades has been a greater enemy to the progress of Bihar. It is proven beyond apprehensions that the best kind of welfarism is possible only through entrepreneurialism, industrialisation, integration of small businesses with large industries rather than treating large industries as enemies of small ones. The problems of Bihar’s economy are the problems actually of leadership – A Koutilyan king (CM) or a lost, uneconomic, socialist relevance seeker! The society to run the economy in longer runs as per social and humanitarian norms, the political economy of Arthashashtra must take the economy in its control.
King (CM) must understand what Arthashashtra wants him to be like. King can achieve the goals of security, stability, prosperity and happiness only by building a strong Kosha. Unlike this Arthashastrian real politicking we have an outdated leadership thinking that welfare through socialism is the way to govern the state. Bihar’s leadership should fight with centre over Amritsar Kolkata industrial corridor, expressways, dedicated freight corridor, toys industry, integrated circuit manufacturing industry, mobile manufacturing industry, defence manufacturing industry, besides leather and textile industries. For all that, there must be a Koutilyan King who understands that KOSHA is key to everything – social justice or welfarism included. Only a king (CM) empowered with strong Kosha which comes from diversified economic activities, industries, modern services sector like hospitality, consultancy, research and development can do the justice and welfare as well.
One of the reasons behind the long economic degeneration has been the thinking of the leadership that Bihar can survive through central grants. The CMs have been captive to such line of thinking. They failed to look beyond central grants like the CM s of Andhra Pradesh (Chandrababu) , Gujrat (Modi) , Tamilnadu , Kerala, Karnataka etc who believed that they can build their own resources so strong. They did fight for central grants as well but not as the primary source revenue but only as supplementary source to their own revenue generated through their own state level vibrant economy. Bihar’s leaders have played the politics of caste so comfortably because revenue income has never been their concern as they took central grants as their birth right. Central grants should never be the primary source of revenue. It should only be supplementary.
Bihar has several good practices to its credit. One such is great agenda of new left in Atlantic region, UK and US, the cooperative model of capitalism which is a Cooperatives of JEEVIKA DIDI , Farmers, street vendors, milk producers, vegetable growers need to be extended to cooperatives of In service sector private education cart owners including coaching business has a market 10 ,000 crore given the students size of Bihar , 80 % of which migrate for coaching classes to other states. Banks operating etc. from Bihar needed to be cajoled and nudged to extend increased loans to geared to be the part of entrepreneurial revolution sweeping.
To Be Continued …
Author – Rajiv Ranjan Bandhu
Senior Faculty, Chanakya IAS Academy Ph.D Delhi University
Picture – Aditi Nandan
