The Hindu Business Line : New approach to planning in Tamil Nadu

Achieving a high growth rate as well as a desirable level of income distribution is a goal that continues to be elusive in India. Thus, the maiden approach of the Tamil Nadu State Planning Commission to place importance on the `growth process', alongside the growth rate, is interesting and appropriate.

There has been a marked shift in the approach of the Tamil Nadu Government towards planning and development. The Approach Paper to the Eleventh Plan (2007-2012), presented for public debate by the State Planning Commission, has come out with a technically sound approach.

Achieving a high growth rate as well as a desirable level of income distribution is a goal that continues to be elusive in India, both at the lower and higher growth trajectories.

In this context, the maiden approach of the newly constituted Tamil Nadu State Planning Commission to place importance on the `growth process', alongside the growth rate, is interesting and appropriate.

The practical and contemporary relevance of the new approach is well reflected in the panel's empirical analysis of the emerging developmental challenges facing the State, based on a comprehensive, sector-wise study.

Agriculture, the critical sector for the overall growth, income levels and well-being of the people all have been in a crisis from 1993-94 to 2005-06.

While the relative share of agriculture to the GSDP (Gross State Domestic Product) has declined from about 25 per cent in 1993-94 to 13.3 per cent in 2005-06, more than half the population (56 per cent) still depends on farming and related activities for its livelihood.

The fact that nearly 56 per cent of the population living in the rural areas is dependent on less than one-seventh of the State's income raises serious concerns over the distribution of income, argues the Approach Paper.

Having recognised the problem right, the Approach calls for a `crucial, direct role' to be played by the State. Further, for the revival of the farm sector, the focus will be on the `farmer and his welfare' rather than on the `farm and/or technology', as has been the case till now. It also identifies specific areas of intervention, such as access to land, credit, market, support prices, and so on. A similar approach is spelt out for all other sectors — social sector, service, and industry — with a marked focus on promoting the welfare of the downtrodden and the marginalised.

Development Record

The development record of Tamil Nadu, post-Independence, shows that the unique process of development is mostly inherited from the first quarter of the 20th century.

Since then, social justice has been accepted as one of the cardinal development objectives to be pursued.

Many innovative social sector schemes and programmes were designed by the ruling DMK government, aimed at directly addressing human problems — social security, food security, nutrition, education, primary health, social welfare, welfare of women, children, and weaker sections, housing, poverty and unemployment.

Most of these schemes are targeted towards specific income and/or social groups. Some were widely appreciated and some even emulated at the national level.

The degree with which such policies are being pursued is further evident from the fact that, unlike its northern counterparts, almost half the public expenditure in Tamil Nadu is on social sector. For inclusive growth, the Approach relies on enhanced public expenditure on social, agricultural and rural sectors so as to directly influence the process of growth. However, in the post-reform period public expenditure on the social sector declined considerably. The reversal of this trend is noticeable now.

The State Budget for 2006-07 rightly raised the allocation to the social sector by 17 per cent over the revised expenditure estimate of 2005-06, and the government has come out with many new schemes in the above areas and made many policy reversals including that of public recruitment. Still, the share of the social sector is yet to reach its pre-reform level, as it constitutes only 35 per cent of the revenue expenditure, that too only as the Budget estimate.

The Medium-Term Fiscal Plan, presented along with the State Budget 2006-2007 under the Fiscal Responsibility and Budget Management Act, 2003, requires eliminating revenue deficit by 2008-09.

Transfers from Centre

Social sector spending should be increased, not only through higher revenue mobilisation, but also by obtaining higher financial transfers from the Centre.

In this regard, one of the immediate concerns is the Planning Commission's persistence with the Gadgil formula.

According to this formula, transfers will consist of 30 per cent Plan grant component on the revenue account and 70 per cent as loan.

The 30:70 ratio is irrelevant as it was decided on at a time when State finances did not suffer as much current debt burden.

Second, when Tamil Nadu spends almost half of its revenue expenditure on `human-centred' sectors even now, it is time for the Planning Commission to reconsider the (ir)relevance of its Plan transfer approach and revise it with more revenue grant component than loan.

The ratio can at least be revised to 50:50 during the Eleventh Plan period.

On the revenue front, after insisting on a reversal of the falling federal transfers, the Approach Paper pleads with the State Government to pursue the case for the Union Government allowing States to levy taxes on the service sector — the highest contributor to the GSDP — to overcome problem of limited tax base and shrinking federal transfer.

The `benefits' that have failed to `trickle down' for so long and even at 8 per cent growth rates at the national level may remain `invisible' forever, for reasons best known to the die-hard neo-liberals. Hence, it is the right time for the Yojana Bhawan to thoroughly re-look at the Approach to the Eleventh Plan.

This appeal deserves significance on two counts: First, the challenges of agriculture, social sector and distributive justice elsewhere in the country are almost similar to that of Tamil Nadu.

Second, it must be noted that democracy has repeatedly rejected the growth-centred neo-liberal reforms through electoral verdict, both at the State and national levels, sternly defying any `shine' or `hype' of the campaign.

(The author is faculty member of the Department Economics, University of Madras; email: k_jothisiva@sify.com)