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The Tamil Nadu budget-2023-24 presented by Finance Minister PTR Palanivel Thiaga Rajan on March 20, 2023 has evoked mixed reactions in the State.
In a panel discussion on the budget, anchored by G. Ananthakrishnan, a senior journalist, on behalf of inmathi.com, Prof. R. Gandhi, former deputy governor of RBI, V.B. Athreya, an economist, and Neelakandan, analyst and author of ‘South vs North’ book gave their perspectives about the budget.
The budget has revealed that the government is focused on five prominent priorities: Economic growth, social protection, education for women, jobs for youth and welfare for the less affluent sections. The main take-away is the operationalization of the much touted Rs.1,000 aid to women-led households with some qualifying conditions.
Asked about his take on the budget, Gandhi said he is happy that the budget is on the path to fiscal consolidation. The focus is on controlling the deficit, restraining borrowings, expenditure and augmenting revenue. Compared to the past three or four years when there were worries and concerns over the fiscal condition of the State, this year’s budget gives some hope, giving priority to good management of fiscal affairs.
The budget is on the path to fiscal consolidation. The focus is on controlling the deficit, restraining borrowings, expenditure and augmenting revenue
Athreya described the budget as not likely to make waves or have a great impact. Talking about how the Union government has for several years been trespassing on the States’ domain and denying the States their due share in tax revenue, he said that Palanivel Thiaga Rajan was strident in his criticism of the Union government on this count in 2021-22, toned down his critical views in 2022-23 and became silent on this in 2023-24.
Rs.1,000 value down
Regarding the Rs.1,000 per month assistance to women heads of households, he said the value of the assistance gets reduced, given that there is inflation. Welcoming the extension of the breakfast scheme in schools, it must be done by the government itself and should not be outsourced. The PPP model – the public-private participation – will not work here.
He said he is not obsessed with what Gandhi called fiscal consolidation. Amid lots of constraints and problem, the government presented this budget. Normally an analysis of a budget ends up reeling out this much allocation for this sector and that much for that sector and so on. Rather than details, it is an overall picture of the fiscal condition which is more important.
Neelakandan spoke about the decreasing vertical and horizontal devolution of funds from the Union government to Tamil Nadu. Against this background, Tamil Nadu has to increase its own revenue resources. In fact, only 17% of the State’s revenue receipts come from transfer of Union government funds to the State exchequer. But left with the shrinking funds on that count and forced to fend for itself, the State has no other go but to tax the people two times the usual in order to achieve what Prof Gandhi called fiscal consolidation. In fact, fiscal consolidation is done at what cost? It’s increased taxes from the people, he remarked. Is it fair, he asked.
Athreya, echoing the similar tenor of views, said that it is the Union government which is the culprit in the whole fiscal system. For instance the GST is one of the indirect taxes which yield revenue mainly to the Union government which, however, does not share the revenue with States much except the GST compensation that has nonetheless been shrinking now. Also there is the cess surcharge from which the Union government earns income that is not shareable with the States. Under these circumstances, TN has to mobilise its own revenue resources mainly from real estate and liquor. But Palanivel Thiaga Rajan last year said that there is 50% seepage from that revenue.
Amid all these constraints the TN budget has been presented, with an attempt to balance the needs and demands of welfare and development. In fact, the State government must plan better tax collections, Athreya said, adding that the Tamil Nadu government has to forego a part of its tax revenue by contributing 50% to the Union government’s schemes and sponsored schemes.
By way of addressing the question of the Union government treating States unfairly, Gandhi said that allocation of funds to States is made only on the recommendations of the Finance Commission. So, there is no question of the Union government acting unilaterally in the matter of devolution of funds. On Neelakandan’s view that States get only 17% funds from the Union government, Gandhi said that if other factors are taken into consideration, it will become clear that it is not 17%, but 33%.
TN has to mobilize its own revenue resources mainly from real estate and liquor. But Palanivel Thiaga Rajan last year said that there is 50 % seepage from that revenue
Pension issue snowballing
While the State government has fulfilled one of its election promises, that is, Rs.1000 p.m. to women, Athreya said the TN budget is silent on the burning issue of restoration of old pension scheme. The government employees across the country had started becoming aware of the new pension scheme’s disadvantages that deprive them of all benefits they have been enjoying under the old pension scheme, Athreya said the TN budget does not talk about the issue.
On this criticism, Gandhi said that a large number of workers in various sectors including the unorganised suffering from various problems have been crying out for the government’s attention. Should a small segment of pensioners’ issue be given as much importance as it is given now?
Lauding the budget allocations giving a push to the SC/ST welfare, Athreya said the government harping on social justice is keen to ensure welfare of SC/ST people.
Budget announcements that all the schools under the Adi Dravidar and Tribal Welfare departments will be brought under the school education department was one measure. Modern hostels for SC/ST students at a cost of Rs 100 crore in Madurai, Coimbatore, the Nilgiris, and Trichy and a new scheme named after ‘Annal Ambedkar’, for which Rs 100 crore has been allocated are others. The scheme aims to promote economic development by creating entrepreneurship opportunities for people belonging to SC/ST communities.
The ‘Iyothee Thass Pandithar Habitation Development Scheme’ to be launched at Rs 1,000 crore for five years will ensure basic amenities in Adi Dravidar habitations in both urban and rural areas and bring about comprehensive socio-economic development.
Climate crisis response weak
As for the climate change issue, the budget has not made any big announcements. The argument put forward at the discussions is that awareness of climate change has just now started building up. Neelakandan said that only when the issue is frequently discussed threadbare it will take the shape of a policy. Only then the budget will make fund allocations under this head.
Gandhi said that the TN budget is, by and large, a responsible budget that has set the State on the path to fiscal consolidation and reduced revenue deficit, given that the government is hamstrung by various constraints. However, Neelakandan and Athreya were of the view that the budget does not have a strong approach to several pressing issues.
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