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The third successive budget speech of Dr. Palanivel Thyagarajan, finance minister of Tamil Nadu, marks a distinct change in its tone and tenor. His first budget speech, preceded by his release of the important White Paper on the Finances of Tamil Nadu, had made sharp criticism of the Union government’s continuing centralization of resources and fiscal decision making, and had noted the severe constraints it placed on the state’s budgetary options. In his second budget speech, the finance minister had already toned down his (in our view, legitimate) criticisms of the Union government.
In his third budget speech on March 20, 2023, he has noted the Union government’s refusal to extend GST compensation, but has been far less vocal on the issue of Union-State financial relations. In another respect, he has been consistent in all his three budgets. He has reiterated in all his budget speeches his commitment to ‘fiscal rectitude’ and his determination to implement the fiscal deficit norms prescribed in the Tamil Nadu Fiscal Responsibility Act (TNFRA). The result this year is a budget characterized by adherence to the norm of fiscal deficit at 3.25% of the gross state domestic product (GSDP) of Tamil Nadu, implying rather modest increases in outlays for several key sectors.
There are several welcome features in the budget. The chief minster’s breakfast scheme for primary school students has been expanded to cover all 30,000 odd government primary schools at a modest cost of 500 crores. The promise of providing women in the state a cash transfer of Rs 1000 per head per month has been affirmed and an outlay of Rs 7000 crores provided, suggesting a potential coverage of nearly 60 lakh women in a year, selected on the basis of eligibility criteria to be specified. The third welcome announcement in the budget is that legislation will be brought to ensure that the SC and ST Sub Plan will get adequate funds as per the norms.
In his third budget speech on March 20, 2023, he has noted the Union government’s refusal to extend GST compensation, but has been far less vocal on the issue of Union-State financial relations
However, the outlay for the sub plan remains well below the norm for this budget year. There are significant increases in outlays for the department of Municipal Administration and Water Supply (MAWS) and for the department of Housing and Urban Development. There is a focus on urban development, with special attention given to sustainable modes of public transport in Coimbatore and Madurai, apart from Chennai.
Chennai metropolitan area and its neighbouring regions have received special attention, while the much neglected North Chennai region, with its significant working class population, also receives some attention.
Health and Education
The outlays for the departments of health and family welfare (HFW), school education and higher education see only modest/marginal increases. The budget estimate of outlay for HFW has risen from Rs 17,902 crores in BE 2022-23 to Rs 18,661 crores, an increase of around 4%, well below the inflation rate and therefore a decline in real terms. The outlay for school education has risen from Rs 36,896 crores in BE 2022-23 to Rs 40,299 crores in BE 2023-2024, a 9% increase that in real terms is hardly 2%. To be fair, the higher education department gets a more significant increase from Rs 5669 crores to Rs 6967 crores, a 20% plus rise, but remains low in relation to the needs of that sector.
The outlay for Adi Dravidar and Tribal Welfare department declines from Rs 4,282 crores to Rs 3,513 crores, a decline that cannot be explained by the move to bring all schools under the education department. While the outlay for MSME rises substantially from a meagre Rs 912 crores in BE 22-23, to Rs 1509 crores in BE 23-24, this is woefully short of what the sector needs in its current crisis situation. Of course, the state government cannot be solely blamed for the MSME crisis, primarily a result of union government policies, but it does have an obligation to address the crisis.
The neoliberal narrative proclaims that incentivizing private corporate investment through numerous tax concessions and other favours will stimulate economic growth that will also help expand employment and eliminate poverty. Thirty odd years of neoliberalism have shown the narrative to be invalid. Yet, budgets are made that expect private investment, suitably incentivized, will provide adequate employment and ensure the well-being of the people. It cannot be claimed that the Tamil Nadu budget steers clear of such assumptions. There is no focus at all on employment, despite it being among the objectives listed in the beginning of the budget speech.
There is no focus at all on employment, despite it being among the objectives listed in the beginning of the budget speech
A final comment
Despite the customary reference to the ‘Dravidian model’, itself variously defined by its advocates, the budget is characterized, not by an assertion of the state’s rights nor by a focus on the wellbeing of working people. It remains in essence neoliberal, with its focus on fiscal rectitude and the hopes it places on wooing corporates via global investor summits.
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