Tamil Nadu’s Black And White Finances, Courtesy TVK
· Free Press Journal
The white paper on Tamil Nadu’s finances produced by the Tamilaga Vettri Kazhagam (TVK) government highlights an outstanding debt of Rs 13.18 lakh crore and poses a stark counter to the narrative of the deposed DMK government that the state has the strongest economy in the country.
Just weeks before the Assembly election, the DMK’s Finance Minister, Thangam Thennarasu, claimed a stupendous 16% growth in the Gross State Domestic Product (GSDP), touching Rs 31.19 lakh crore last year, and a $1 trillion economy in sight by 2030, all of it the product of robust fiscal management.
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The C. Joseph Vijay government is now warning that the staggering accumulated inter-generational debt will have to be paid in the future by young people; the malaise itself is the result of a steady decline in state-generated revenues.
Revenue leakages and fiscal strain
At the root of the problem, says the white paper released by Finance Minister N. Marie Wilson, is systemic corruption in revenue-earning departments, failed compliance enforcement and property guideline value rationalisation.
This ranks as an irony because a former reformist DMK Finance Minister, PTR Palanivel Thiagarajan, had, in 2022, underscored the very same problem. He cited seepage in levies on alcohol, mining, registration and other areas contributing to revenue losses of 2-3% of the GSDP. Today, the DMK led by M.K. Stalin can only rue at leisure its decision to punitively eject PTR from his position.
What should worry the TVK government, though, is the prospect that it may have overpromised schemes to the electorate, such as unemployment doles, six free LPG cylinders per year, Rs 2,500 per month as enhanced assistance to women, and 200 units of free power, without assessing the scope to mobilise sufficient revenues. On the other hand, it could use smart technology to target some benefits to the lower quintiles.
Growth potential and missed opportunities
Tamil Nadu is indeed a vibrant economy, with significant international investments in the automotive, manufacturing and services sectors that add 53% of gross value addition. Yet, it has recently been bypassed for some big projects, such as Google’s $15 billion Hyperscale AI Hub that went to Visakhapatnam in Andhra Pradesh and the KIA factory in a pre-DMK era, which also went to Andhra Pradesh.
Although major announcements were made during Stalin’s government about the expansion of international retail, IKEA has only started deliveries in Chennai and not opened stores that were announced in 2017.
Infrastructure deficits are also slowing growth. The expansion of Chennai Metro Rail, although happening faster than in Bengaluru, has severely disrupted retail citywide due to the construction work. Metro rail investments are fuelling real estate speculation, but the state government has no value-capture frameworks to mop up revenues.
Need to tackle the black economy
At its core, the TVK government’s policy must recover large revenues disappearing into the black economy and eliminate rent-seeking that is curbing the expansion of industry and services.