labels: economy - general
TN economy not vibrant: Experts news
Venkatachari Jagannathan
05 January 2002
Vellore: The present status of the Tamil Nadu economy came in for a detailed discussion at the 84th annual conference of the Indian Economic Association held at Vellore Institute of Technology (VIT), Vellore, recently.

Tamil Nadus economy is said to be one of the progressive ones in the country. Not any more, say economists. Kicking off the session, P Jegadish Gandhi, secretary, Vellore chapter of the association says the states economic and fiscal trends since the mid-nineties do reveal certain disquieting features. "The gross state domestic product (GSDP) growth the total value of the goods and services produced in an economy in a year has declined from 6.66 per cent during 1991-1996 to 6.22 per cent during 1996-2001."

Similarly, he says, the income from the primary sector (agriculture) witnessed a downward slide from 4.33 to 2.66 per cent during the corresponding period. The performance of the secondary sector (industry) also dipped from 6.92 per cent during 1991-96 to 4.14 per cent during 1996-2001.

"But the tertiary (services) sector has gone up from 8.07 per cent to 9.47 per cent during the same period. This is due to the contribution mainly from the private sector. But in the period 1990-91 to 1999-2000, the revenue expenditures grew from Rs 5,638 crore to Rs 20,278 crore. And, the revenue deficit swelled from Rs 550 crore to Rs 4,400 crore," he says.

Referring to the recent hike and partial rollback in the states bus and power fares, he calls for a greater discussion and transparency if hard economic decisions are to be given effect to. "Such exercise is imperative, given the conceptual shift that is taking place in the nations economy, where the states role as an economic player is getting redefined."

"The Tamil Nadu government can raise anything between Rs 25,000 crore to Rs 30,000 crore if it privatises the 17,000 bus routes," says VIT chancellor G Viswanathan, also a former state minister. Castigating the government for failing in its primary duty of collecting taxes, he says "the sales tax arrears are an alarming Rs 7,244 crore and it will be a big relief for the state government if even half of that is collected."

The bad financial position is mainly due to a lax in tax collections, higher interest outgo, pension payments and subsidies. Says state Planning Commission member K V Palanidurai: "Interest payment has gone up to Rs 3,299 crore from Rs 455 crore during 1991. Similarly, pension payment shot up to Rs 3,000 crore from Rs 321 crore a decade back."

The food subsidy also went up to Rs 1,570 crore from Rs 270 crore in 1991 as the state government decided to bear the increase in the Central issue prices. Palanidurai says the state government could not increase its collections through taxes, as the tax-GDP ratio is one of the highest in the country. The financing of the VIII and IX Plan was done mostly through borrowings and interest payment has emerged as a major expenditure item.

"The state will not be able to achieve the IX Plan growth rate as the agricultural growth for the past two years is negative," he says. On the agriculture front, the net sown-area remains static or on the decline while the fallow land is high. And incremental production is expected from more intensive use of land for which water availability is crucial.

"Here again, the state has fully harnessed the surface water potential, and the ground water exploitation reached alarming proportions leading to environmental and ecological problems," says Palanidurai. "The state is witnessing a deceleration in the growth rate with the IX Plans targetted growth rate unlikely to be achieved. Also, the secondary sector, especially the manufacturing sector, is also not doing well with a growth of less than 3 per cent per annum."

Given this situation the state is preparing for the X Plan (2002-2007). The Central Planning Commission in its approach paper has set a target of l8 per cent GDP growth. "In the past, Tamil Nadu has always set a target growth equal to the national target, or slightly higher. The same will be followed now," says Palanidurai.

To achieve this, the state has to have an investor-friendly policy to set up investments from the private sector, reform its tax system, develop infrastructure and balance the budget deficit by phasing out the revenue shortfalls, he says.




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TN economy not vibrant: Experts