A surprising budget in Tamil Nadu

The Tamil Nadu budget marks a shift in the approach of the DMK towards subsidies

A tweet by Tamil playwright and public intellectual Indira Parthasarathy on Tamil Nadu’s budget and the way it went viral symbolises the public perception of the budget by and large. Professor Parthasarathy, not known for making comments often on political events, called the budget “nuanced, broad-based and people-oriented”. But what was more surprising, to critics and supporters of the ruling DMK alike, was the budget itself, the regime’s first budget for a full financial year (2022-23).

The supporters were surprised by the absence of any dramatic announcement of freebies. There was no word on the restoration of the old pension scheme for government staff, which was promised by the ruling party during the 2021 Assembly elections. The critics were surprised as the DMK, which rode back to power in 2006 on the assurances of free distribution of colour TV sets and cooking gas stoves, was showing an inclination towards the rationalisation of subsidy distribution.

The budget sends a clear message that the government is conscious of the challenges that lie ahead. The impact of the Russia-Ukraine war, the expected rise in inflation and interest rates, the COVID-19 pandemic, uncertainty over the continuation of compensation to States for the implementation of GST and the probability of monetary loss, and the absorption of entire losses of the perennially loss-making power utility, the Tamil Nadu Generation and Distribution Corporation, from 2022-23 all find a mention in the Budget. Keeping these factors in view, the government conservatively estimates only 17% growth for the next year with regard to the State’s Own Tax Revenue (SOTR), which accounts for 60% of its total revenue receipts. However, it has projected a growth rate of nearly 25% for 2023-24. Interestingly, since 2006, the SOTR growth rate breached the 20% mark only twice.

However, the government is bullish about the progress on the fiscal front in two years in the backdrop of what it has ‘achieved’ in the current year. As stated by Finance Minister Palanivel Thiaga Rajan in his budget speech, this year there will be “a reduction in the absolute level of the Revenue Deficit by over ₹7,000 crore [vis-à-vis the previous year, a COVID-19 year], reversing an alarming trend of increasing deficits every year” since 2013-14. The government is upbeat about realising substantial gains in cost savings through measures including the data purity project, which is expected to weed out ineligible persons from the purview of welfare schemes.

This year’s budget is noteworthy for more reasons. It is seeking to refashion the existing marriage assistance schemes into one of promoting higher education for girls by paying ₹1,000 a month directly into their bank accounts provided they have studied from Classes 6 to 12 in government schools and joined undergraduate degree, diploma and ITI courses. The candidate will get the assistance till the completion of her courses without any break. Increasingly, the emphasis of the government is on ensuring that its welfare schemes reach only genuine beneficiaries. This DMK regime is seeking to mark a shift in the approach of the party towards subsidies, as universal application of subsidies had all along been the cry of the DMK and also of the AIADMK.

To give the much-needed push to the construction industry, the government has decided to raise the existing Floor Space Index in areas adjoining the alignments of metro rail, suburban rail, national highways and bypasses. Landowners have demanded a similar measure along the East Coast Road too. What is to be seen is how long the DMK regime is able to hold on to its position firmly on fiscal consolidation, without compromising on the concept of welfarism.

ramakrishnan.t@thehindu.co.in