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The Tamil Nadu government is set to present its Budget for the year 2023-2024 on March 20 amid expectations that it will keep electoral promises made by the DMK such as aid for women, and that it will announce a return to the Old Pension Scheme, despite constraints.
The state, like many others, does not get its fair share of tax revenue from the Centre, and this limits its funding of social welfare measures that the Dravidian model is known for.
Economist Prof V B Athreya spoke to inmathi.com in an interview about the various aspects and issues that would come into consideration while preparing the Budget.
One of the DMK’s electoral promises, which the people expect will be fulfilled, is the monthly aid of Rs 1,000 for women. Similarly, government employees expect an announcement regarding restoration of the Old Pension Scheme — a demand that’s been gaining traction across the country now, Athreya said, adding that the BJP-led union government, eyeing the 2024 parliamentary elections, would probably fulfil the demand.
Tamil Nadu Finance Minister Palanivel Thiagarajan has often spoken about how the union government’s step-motherly attitude to non-BJP-ruled states limits states’ ability to fulfil their welfare obligations.
There are central sector schemes and centrally-sponsored schemes. But states such as TN, Maharashtra etc, which are defined as belonging to Group 1, are forced to spend 80 per cent for central flagship programmes, while the Centre only contributes 20 per cent
“Last year, he presented only a modest Budget, even though there was potential for a full-fledged one. Let us see what he is going to do in the forthcoming budget,” Athreya said, adding that the budget should allot funds to deliver the promises already made to the people.
Talking about transparency of budget proposals, the economist said that except the budget speech and medium-term fiscal policy, the TN Budget document is not uploaded online as is the case with the union government. In fact, except economic analysts, nobody gets a look at sector-wise allocations made in the budget.
Speaking about the union government’s obligations to the states, Athreya said the Centre always takes the states for a ride. There are central sector schemes and centrally-sponsored schemes. But states such as TN, Maharashtra etc, which are defined as belonging to Group 1, are forced to spend 80 per cent for central flagship programmes, while the Centre only contributes 20 per cent.
“It is our money and our schemes, but it is the union government that takes credit for the successful implementation of such schemes, not bothered about the contribution of the states,” Athreya said.
Next comes tax revenue. The union government always acts unilaterally, taking decisions on corporate tax and individual income tax. Though States have to be given a share of the taxes, they are not, in practice. “Thus the union government deceives the states, not sharing the revenue from taxes with the states,” he said.
“It changes the tax laws on its own, making the most of the constitutionally guaranteed powers, and now and then announces sops as well” he added. For instance, Union Finance Minister Nirmala Sitharaman announced a reduction in corporate tax from 30 per cent to 22 per cent, and said it would entail a loss of revenue of Rs 1,45,000 crore. Who caused the heavy loss? What motivated the union government to please corporates with this tax concession? It was projected that it was a loss to the union government. But on the contrary, the states too are affected because the taxes are very much in the divisible pool.
The union government always acts unilaterally, taking decisions on corporate tax and individual income tax. Though States have to be given a share of the taxes, they are not, in practice
“The union government changes tax laws and causes losses to the states,” said Athreya.
As PTR has frequently mentioned, the union government denies States their due share in some other tax revenue sources as well. Another income source of the union government that the states have no right in claiming a share to are cesses and surcharges. Cesses and surcharges have been non-sharable revenue sources right from the days of Congress rule.
“This gross injustice to states should be highlighted in the public domain so that people get to know about the union government’s unfair treatment of the states,” Athreya said. But owing to certain political compulsions, the political parties are stoically silent on this issue. Now that the DMK has got a powerful mandate, it can act stridently.
Social justice is a buzzword in Tamil Nadu politics. To this end, the government announced a monthly assistance of Rs 1,000 for women, giving an impression that it was going to be universal. However, of late, it appears that only those who meet certain eligibility criteria would be given the aid.
“To me, this Rs 1,000 scheme is worthless and meaningless because inflation will eat into its value,” Athreya said, adding that the recession happening all over the world now will reduce the Rs 1,000 to nothing. “Rather than giving it as cash, it is better to make it a concrete income source. Anyhow, it is their scheme and they have every right to implement it. Let us see what they’re going to do about it in the TN budget.”
One will also have to see whether the TN budget would restore the Old Pension Scheme. The demand has been gaining momentum all over the country as all stakeholders have understood that the new pension scheme robs them of the benefits they received under the old system.
The number of senior citizens has been rising in India alongside the shrinking youth population. “In these circumstances, it is a great crime to give the pensioners a raw deal. The society has a moral commitment to the senior citizens,” Athreya said.
The pension issue cannot be analysed without calling into question the massive profits made by corporates and capitalists, he said. The government defends its support to the corporates, saying they are creators of wealth. Even as big corporates earn massive incomes on the backs of their workers, the government seems to be grudging senior citizens the nominal benefits that the Old Pension Scheme gives them, despite harping on about the welfare of the people. Without using any jargon or fancy words, it can be plainly said, “Without workers’ contributions, there is no wealth creation.”
This issue will become a political issue down the line, one that has the potential to overthrow regimes, he said.
While the Supreme Court has delivered a judgment stating categorically that the states need not comply with the recommendations of the GST council, no state has highlighted this and fought for their rights
The core of the issue is that without taxing the big corporates and the affluent, there can be no social justice. While the poor and the middle-class constitute the majority of the people, their welfare cannot be established without levying heavy taxes on the rich and the super-rich. It is in this context that the so-called Dravidian model gets a beating.
On the one hand, there is a shrinking funds flow from the Centre to the States. On the other, the state government has to implement welfare schemes for the uplift of the economically backward. “See, without taking on neoliberalisation and without struggles, there can be no Dravidian model of social justice. Just a few welfare schemes do not amount to social justice,” Athreya pointed out.
For instance, the proportion of women employed in various sectors such as the medical field or other STEM fields is low. Besides, wages given to women are also abysmally low. Without addressing such issues, the Dravidian model cannot be established, Athreya said emphatically.
Another hurdle to States getting creative with the Budget is they are left to the mercy of the union government, having no authority on direct taxes. Their rights to due share in indirect taxes has also been suppressed thanks to the GST regime. While the Supreme Court has delivered a judgment stating categorically that the states need not comply with the recommendations of the GST council, no state has highlighted this and fought for their rights. “They fear their voices may go unheard in the GST Council where the ruling BJP has a brute majority. After all, it is politics that dictate terms for the survival of political parties,” Athreya said. “All parties have their own interests to be served in toeing the line of the ruling establishment. After all, politics and economics are inseparable”
Despite these limitations, Athreya hoped the Tamil Nadu’s finance minister would deliver, and the Budget set to be presented on March 20 meets the ideals of the Dravidian model of economics and social justice.
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