Thiaga Rajan said that a âbusiness-as-usualâ approach cannot continue and that there must be a fundamental change if one is to break the vicious cycle of rising debt and rising costs. ‘interest. On the other hand, however, he said it presented an opportunity to carry out “once-in-a-generation” reforms, many of which should have been undertaken years ago by any responsible government.
âThe state’s fiscal position is in dire circumstances, in part due to external circumstances, but to a large extent due to structural flaws in governance that have not been addressed in a timely manner. The Covid pandemic has dramatically worsened the situation and highlighted how vulnerable Tamil Nadu is currently. There are no more tampons. No budgetary margin that will allow delays, âhe said in the white paper.
The report paints a grim picture of Tamil Nadu’s finances, but is quick to add that the decline is reversible. The FM also clarified that the report is not an attempt to create a justification to dilute or abandon the commitments made to the people in the recently concluded elections.
GSDP per capita in Southern States (in rupees)
|States||13th Finance Committee
Average GDP per capita
(2004-05 to 2006-07)
|Rank||14th Finance Committee
Average GDP per capita
(2010-11 to 2012-13)
|Rank||15th Finance Committee
Average GDP per capita
(2016-17 to 2018-19)
|Andhra Pradesh||30,561 *||8||73,979||9||1 52 436||9|
|Karnataka||33,433||7||76,781||8||2 04 419||3|
|Tamil Nadu||36,563||6||98,327||4||1 95 377||5|
* Note: Includes telangana
Source: TN Finance White Paper
“The delivery by this government not only of the 4,000 rupees promised by ration card, but also of 14 essential products not mentioned in any promise of poll, testifies to the firm intention of this government to honor its commitments”, indicates the report. .
In addition, Thiaga Rajan said that there had been a sharp decline in the growth rate of the industrial sector which was 10.30 percent from 2006-07 to 2010-11, which fell to 5.49 percent in during the period 2011-12 to 2015-16. before accelerating to 8.17% over the period 2016-2017 to 2019-2020.
The service sector decelerated sharply, from growth of 11.23 percent over the period 2006-07 to 2010-11 to 7.44 percent from 2011-12 to 2015-16 and 6.03 percent over the period 2016-17 to 2019-20.
âThe slowdown in the performance of industry and services in recent years is a matter of concern. This pattern of asymmetric growth meant that the most important segments of the economy, which are the industrial and service sectors, failed to start up and grow fast enough. It also implies that Tamil Nadu could lose ground to comparator states unless these trends are reversed quickly, âhe said.
The report also states that while Tamil Nadu has a large number of MSMEs, the growth pattern of the industrial sector is volatile and the value added in the MSME sector is lower than in Maharashtra and Gujarat.
“Tamil Nadu aims to increase the manufacturing share of GDP to 30% by 2030, from 25% currently,” said Dr Vidya Mahambare, professor of economics at the Institute of Great Lakes Management, Chennai . âIf this is done, it would boost employment, especially in the MSME sector. Higher growth would increase government tax revenues. The white paper also calls for an increase in property tax and a rationalization of electricity and transport subsidies. . The latter can be difficult to achieve given that the state also aims to be a major player in the manufacture and use of electric vehicles. An increase in the cost of running electric vehicles could negatively impact their adoption, âshe said.
In the report, the FM said Tamil Nadu is in an unsustainable budgetary situation and called the situation “alarming”. Compared to other states, in 2017-18 and 2018-19 the average revenue deficit for all states and UTs was 0.1% of GSDP in the two years, for Tamil Nadu it was respectively 1.5% and 1.4% of the GSDP.
“The current levels of budget deficit are unsustainable, mainly because a substantial part of the budget deficit is simply used to finance the revenue deficit … Tamil Nadu has the dubious distinction of being currently the largest borrower in the free market. among all the states in India, âthe report says.
Thiaga Rajan also said urgent corrective measures are heading for better targeting and reorientation of subsidies towards areas that enhance the public good and have positive externalities. The cost-effectiveness of alternative means of delivering planned financial assistance to stakeholders could also be explored, without compromising the provision of essential products and services to vulnerable segments of the population.
âTamil Nadu has more ration cards than it needs,â said Anand Srinivasan, financial consultant and economist. âI see a lot of well-off people claiming subsidies. Expecting people to be altruistic and hope that they will remove the subsidies themselves will not happen. I think at least the free rice should go to just 40 – 50% of the population. Today it goes to around 60-70% of the population. ”
He said that at least half of Tamil Nadu can go without a ration and that if retirees who have received more than Rs 20,000 in pension have their names removed from the list of ration cards for rice alone, not for sugar and other things, there will be a big saving.
The finance minister further said that Tamil Nadu has the third highest guarantees among any state after Telangana and Andhra Pradesh. While the comprehensive guarantees provided by the government of Tamil Nadu in 2006-07 were Rs 3,960.09 crore, they had climbed to Rs. 53,697 crore in 2014-15, mainly due to large increases in guarantees in the electricity sector, which began to decline after the implementation of the UDAY program.
However, the guarantees have increased again due to the unfavorable financial situation in 2020-21 in the electricity and transport sectors and stand at Rs 91,818.44 crore. Of this amount, Rs 82,916, 90 crore was due to the electricity sector. The guarantee for the transport sector, which was Rs 4.25 crore in 2018-19, now stands at Rs 4,642.72 crore at the end of 2020-21. These guarantees represent a significant contingent liability for the state government.
“Transportation is not an area that should bleed, we can certainly see what needs to be done to make it profitable. Electricity is another area that can be looked at. Electricity has been bleeding for a long time. We absolutely have to do this. . pay attention to our electricity commission and see where this money is lost and try to be able to fix it, so that it becomes a surplus rather than a deficit â, said Ar Rm Arun, president of SICCI.
KE Raghunathan, president of the Consortium of Indian Associations (CIA) welcomed the FM’s decision but warned that these steps might not be easy for the public to digest.
âAccording to the Minister of Finance, continuing to borrow and widen the deficit is not good and must be corrected urgently. pressure, with the central government doing its part to increase inflation with fuel costs, zero tax breaks, etc. he said.