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The state finance minister, P Thiyagarajan delivered a welfare budget on March 18. But there was little in it to support projections on economic growth and tax buoyancy that would pay for the spending while keeping deficits under control.
The budget is not aimed at increasing economic growth and development by leveraging or adding further economic and institutional infrastructures facilities in the state. Several major industrial development projects have been delayed.
The broad focus areas highlighted in the budget do not support economic growth. Yet, the budget has projected that the nominal Gross State Domestic Product (GSDP) growth of Tamil Nadu will be 14.0% in 2022-23 and 14.0% in 2023-24. The goal is one trillion dollar economy by 2030. The budget forecasts some 25% growth in tax revenues to pay for welfare expenses and keep deficits under control. This can come only with high economic growth.
The announcement made in the budget for setting up of new industrial parks in districts like Coimbatore, Perambalur, Madurai, Vellore, and Thiruvallur is not backed up with specific sector specialisation or tie-up with major industries houses.
Growth estimations in the budget are too ambitious and do not match ground realities. The environment is not conducive for rapid economic growth.
Economic growth will come from manufacturing and services sectors largely. But the MSME sector has been allocated a measly Rs 911.5 crore.
Tamil Nadu has about five million MSMEs which accounts for an 8% share all-India and the third-highest in the country. The sector employs 10 million people (Male-7 million and Female-3 million). According to the Union MSME ministry, as of November 26, 2021, in the Udyam registration portal, 6.23 lakhs units were registered from Tamil Nadu,
During the last two years’ pandemic period, the MSMEs sector was most hit by loss of employment, wealth generation, etc. The state budget failed to take into account the severe pains and financial stresses faced by this sector. The budget provision of Rs.100 crore for the Tamil Nadu Credit Guarantee Scheme for MSMEs is just not adequate. There is no indication at all in the state budget that the state has approved the pilot phase scheme on January 4, 2022, through which Rs 100 crore will be disbursed by the end of March 31, 2022.
The allocation for industries department, which generates employment directly or indirectly, of Rs.3,267.91 crore is paltry. There is talk about boosting public infrastructure facilities to promote exports from the State with a target of $100 billion by 2030. But the budget has largely ignored this. Service sector has been ignored even more.
The announcement made in the budget for setting up of new industrial parks in districts like Coimbatore, Perambalur, Madurai, Vellore, and Thiruvallur is not backed up with specific sector specialisation or tie-up with major industries houses. Except Perambalur, many of these districts already have industries. No fund allocation has been made for the development of parks. In the past, many such announcements were made with or without funds allocation but nothing happened even after years of demands from industries associations and entrepreneurs in the state.
The overall allocation of Rs.20,400.24 crore for the Municipal Administration and Water Supply Department which covers more than 54% of the State population is not adequate given the acute shortage of quality urban infrastructure and services. The token amount of Rs 10 crore each allocated in the budget for newly created city corporations like Tambaram, Kanchipuram, Kumbakonam, Karur, Cuddalore, and Sivakasi serves little purpose.
The following announcements made in the state budget for urban areas could address long pending structural issues. They can make a difference if implemented properly.
- State’s share of Rs 2,169 crore allocated for municipal solid waste management to improve sanitation under Swachh Bharat Mission 2.0 scheme of Union Government
- Rs 2,130 crore for projects of water supply and sewage management under the AMRUT Scheme of Union Government.
- The Outer Ring Road from Minjur to Vandalur with a length of 62 km proposed to be developed as a Development Corridor with the establishment of large-scale residential complexes, SIPCOT industrial parks, recreational spots, warehouses, horticulture parks, organic food processing zones, and plug-and-play facilities for industrial development along this corridor.
Unless the state government rationalises power subsidies through a Direct Beneficiary Scheme, losses cannot be arrested
The new scheme, Kalaignar Nagarpura Membattu Thittam, and Singara Chennai 2.0 have been allocated Rs 1,000 crore and Rs 500 crore, respectively. It is not clear how this scheme will be different from the ongoing smart city projects. It could be just that the ruling party wanted to have its own scheme though the budget has allocated Rs 1,875 crore for the Smart Cities Programme.
Given the crisis of the power sector in the state, the budget did not talk about promoting alternative energy sources such as solar and wind. The state finance minister did say: “Tamil Nadu Generation and Distribution Company (TANGEDCO) is a matter of grave concern as it continues to incur huge losses every year”. But the budget bore 100% of Tangedco’s losses for the current year (2021-22) and further gave Rs 9,379 crore to reimburse the tariff subsidies being provided by the Government.
Unless the state government rationalises the subsidies through a Direct Beneficiary scheme the losses cannot be arrested in the state. The budget announcement of loan waivers of Rs.4,131 crore would erode institutional morality and credit availability for dutiful citizens who repay on time. Loan waivers only give wrong ideas.
In sum, the state budget has targeted social welfare to create a votebank for the DMK. But achieving overall state prosperity has been ignored. AI, blockchain, innovations, R&D, specialised recycling centres, eco-friendly processing systems and other cutting edge technologies that could promote growth were missed.
(The author is an economist and public policy expert)