Financial tightrope for TN

After presenting a dismal scenario of the state’s economy through the White Paper and suggesting mopping up revenue through raising taxes just a few days ahead of the budget, finance professional turned politician PTR Palanivel Thiaga Rajan, who presented the DMK government’s paperless, maiden budget last week, churned out a googly of sorts by reducing the price of petrol by Rs 3, drilling a significant hole in the state economy while refusing to tweak any of the revenue-generation streams significantly. For a state still reeling under the after-effects of successive waves of COVID-19, the budget did come as a respite and the Finance Minister’s assurance that ‘while improving the fiscal situation, the state will prioritise the promises made in the election manifesto and implement them in stages’ has been a relief. The highlight of the budget, however, has been PTR’s insistence on data-centric governance to ensure that government welfare schemes reach the deserving better, which could be a game-changer in the long term for the people of the state irrespective of which party is in power. The attempt to link all government data sources to better understand the economic status of the citizens, smart metering of all public utilities, prioritising e-procurement to ensure transparency and digitally enabling workflow of engineering departments is the need of the hour and if implemented properly, it will see TN enter a new era of clean, transparent governance if the FM walks the talk. At a time when climate crisis poses a severe threat to the planet, the DMK government’s focus on critical environmental issues such as climate change and the proposal to form action groups such as the Tamil Nadu Climate Change Mission to focus on climate change mitigation with an outlay of Rs 500 crore and the Tamil Nadu Wetlands Mission for ecological restoration of wetlands with an outlay of Rs 150 crore, deserve special mention. The state government has also fulfilled its electoral promise to the TN farmers by preparing a separate budget for agriculture. If one were to look at sector-wise allocation in the budget, the state has allocated 13.3 per cent of its total expenditure for education, 6.1 per cent on health, 7.7 per cent towards agriculture, 6.1 per cent towards rural development and about 5% towards infrastructure development (roads and bridges). Stalin’s government has also dedicated a significant portion of the annual budget to some of the DMK’s pet projects including the latest version (2.0) of their flagship ‘Singara Chennai’ project, construction of more flyovers and bridges, and Tamil development through the revival of the Central Institute of Classical Tamil as well as the Kalaignar M Karunanidhi Semmozhi Tamil award, which has not been presented since 2010. The budget proposals do look promising and if implemented in the right spirit could direct TN towards a brighter future. However, PTR has reason to be cautious as the state’s fiscal deficit (excess of total expenditure over total receipts) is expected to be Rs 92.529 crore at 4.33 per cent of the GSDP and the outstanding liabilities (accumulation of borrowings taken by the state government over the years) is expected to be 27.1 percent of GSDP by the end of the budget term. PTR hopes to plug this gap by increasing the tax GSDP ratio, which, according to him, has deteriorated from 8.48 per cent in 2006-07 to just 5.46 per cent in 2020-21, an estimated loss of about Rs. 65,000 crore. The DMK’s ability to fulfil its poll promises made to the TN voter could depend on how effectively Thiaga Rajan plugs the leakages in revenue and tax collection and revives the state economy. And it looks like he has his work cut out for him.