Tamil Nadu budget 2024-25 has several warning signs for the state economy. While there is no official assessment of the economy through a State Economic Survey, the budget does show that blaming the Center will not camouflage deep set problems.
Fiscal deficit has increased by some 18% compared to 2021-22, revenue deficit increased by 19%, and outgo in government salaries has increased by nearly 40% and in pensions and retirement benefits by 50%. Interest payments have increased by a whopping 74% compared to 2021-22 and, for the upcoming financial year, the government intends to borrow Rs 1.55 lakh crore that represents an increase of 43% over 2021-22.
The power sector is in deep trouble and other state public sector units continue to be in dire straits with their losses mounting. Fiscal deficit continues to be at a 3.44% high though below limits as per the FRBM Act
The 2024-25 state budget is a welfare budget that promises doles to alleviate the suffering of poor people while not advancing on delivering basic facilities, services and livelihoods for them. A moot point is how the state can claim to be a model state if it cannot do that. Tamil Nadu continues to claim to be the 2nd largest economy among states. But Uttar Pradesh has overtaken India and stands second. This should serve as a warning to the rulers of Tamil Nadu.
The power sector is in deep trouble and other state public sector units continue to be in dire straits with their losses mounting. Fiscal deficit continues to be at a 3.44% high though below limits as per the FRBM Act
Chief Minister Stalin with Finance Minister Thangam Thennarasu
Another alarming piece of statistics that despite more than 50 years of the existence of a clearance board, some 6 million people continue to live in urban slums. One million live in Chennai slums.
The state budget has neatly sidestepped the vision of achieving the one trillion-dollar economy goal by 2030. The budget proposes no structural reforms to help achieve that goal.
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Tangedco continues to be among the worst managed power utilities in the nation. Its accumulated losses are around Rs 1.5 lakh crore and outstanding loans are another Rs 1.6 lakh crore. Mounting losses and loans are ignored in the state budget. This year the budgetary support to Tangedco is Rs 14, 442 crores.
With respect to the tourism sector, the fund allocated is merely Rs.38.20 crore. That’s a big gap in a state that has much potential. District collectors continue to be in charge of tourism promotion committees at the district level. They certainly have other priorities.
The promise of providing payroll subsidies to MNCs in service sector is a big blunder. The budget says the state will “incentivise the creation of high paying jobs in new GCCs by providing a payroll subsidy of 30 per cent in the first year, 20 per cent in the second year and 10 per cent in the third year for jobs with pay above Rs.1,00,000 per month.”
Tamil Nadu has about 5 million MSMEs enterprises (49.48 lakhs), the 3rd highest share in the country, providing jobs to 1 crore people in the state. The state has allocated merely Rs 1,557 crore for the MSMEs sector
Out of 1,580 GCCs in the country, only 150 GCCs (9 %) with about 47,000 persons are in Tamil Nadu. It is not known how many of them are earning one lakh per month. Instead of this, the state government can identify the key units in MSMEs sector that employ 20 or fewer workers for similar subsidies which will help the sector to revive and face global competitiveness while providing jobs and social security benefits.
Tamil Nadu has about 5 million MSMEs enterprises (49.48 lakhs), the 3rd highest share in the country, providing jobs to 1 crore people in the state. The state has allocated merely Rs 1,557 crore for the MSMEs sector.
It was announced in the budget that under the Naan Mudalvan scheme, the state has trained 28 lakh students over the last three years out of which only 1.19 lakh students actually got employment opportunities, which is 4.25%. Obviously, this scheme is not working. The skilling programme needs a complete overhaul.
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Structural reforms like decentralization of power, administrative devolution, and financial devolution to local bodies are consistently ignored by the state government. None talks about the non-implementation of State Finance Commission recommendations for local bodies.
Due to the highly centralized form of governance from the state capital, road infrastructure, drinking water supply, and street lighting continue to suffer. Water bodies have gradually deteriorated over time due to encroachment and lack of maintenance, and no timely collection and recycling of non-biodegradable waste. S Narayan, former finance secretary in the Union government and now part of the Tamil Nadu Chief Minister’s Economic Advisory Council has said that “the finances of the state heading down the path of unsustainability, but there is little in the budget to address this.” This best sums up the budget.
(The author is an economist and public policy expert)
