The Hindu Business Line : Tamil Nadu Budget 2008-09

In spite of a number of imaginative initiatives to address the grievances of the rural and urban poor, the balances in the Tamil Nadu Budget for 2008-09 remain in healthy position, thanks to the prudent management of finances by the Government.

While maintaining its record of new and imaginative popular initiatives, the Budget is fiscally responsible and responsive to the challenging needs of an economy such as Tamil Nadu that faces stresses as a result of globalisation and other developments.

S. Venkitaramanan

The Tamil Nadu Budget for 2008-09 presented by the Finance Minister, Mr K. Anbazhagan, on March 20, 2008 bears the mark of leadership of the Chief Minister, Mr M. Karunanidhi. This has been acknowledged by Mr Anbazhagan himself.

The Budget continues the tradition of being fiscally responsible and responsive to the challenging needs of an economy like that of Tamil Nadu, which faces different stresses as a result of globalisation and other developments. Managing within the Fiscal Responsibility and Budget Management (FRBM) norms is a creditable performance, which speaks of the wise leadership of the Chief Minister.

Critics who were expecting the Budget to be irresponsible and to run into high deficit because of populist policies were proved wrong. In spite of a number of imaginative initiatives to address the grievances of the rural and urban poor, the Budget balances remain in healthy position, thanks to the prudent management of finances by the Government.

Kerala example

In the first place, the Budget of 2008-09 has given importance to meeting the demands of agriculture. Its initiative in granting debt relief for borrowers from co-operative institutions is a bold one.

At the same time, one cannot help remarking that a similar measure has not addressed the problems of farmers who may have borrowed from money-lenders.

A possible solution could be the one followed by the Kerala Government in its debt redemption measures, where the farmers’ debt to money-lenders is arranged to be settled by suitable loans from public sector banks.

This has been suggested by the Radhakrishna panel on farmers’ indebtedness, appointed by the Government of India. I hope the Chief Minister will examine similar measure to solve the problem of those farmers afflicted by heavy indebtedness to money lenders, carrying high rates of interest.

The local panchayats, self-help groups (SHGs) as well as civil society can be involved in the exercise. A difficult job, but farmers’ problems, which the Government seeks to address, justify the effort.

Among the initiatives in agriculture, there are programmes to increase outlays on strengthening the irrigation facilities.

The Budget details the measures covering the whole State. It takes advantage of Centrally-aided projects to strengthen the management of water bodies in different parts of the State. It is also significant that the Government has focused attention on intra-State linking of rivers even as it presses for all India inter-State linking of rivers.

This is a more feasible option, although existing users of waters even within a State can raise objections. The Budget shows that the Government is aware of the importance of improving the irrigational infrastructure.

Spurs for industry

The initiatives in respect of industrial development are worth mentioning. The Budget has indicated how the Government has taken advantage of special economic zones (SEZ) programmes and garnered a number of SEZ schemes for the State. It speaks to the credit of the State Government that it has engendered a conducive industrial climate, which makes the State a favoured destination for various multinationals.

Especially noteworthy is the success of the Government in attracting automobile majors from abroad to set up facilities in the State. It augurs well for the growth of employment opportunities in the State.

TextileS need more attention

WhileThe Budget notes that 32 SEZs have been approved in Tamil Nadu so far and 29 of them have already been notified by the Central Government.

Efforts are being taken to set up SEZs in Nanguneri in Tirunelveli District, Krishnagiri, Perambalur and Ennore, which show that there is no hesitation on the part of the State Government to embrace the concept of SEZs, although there has been some opposition. This reflects the pragmatic approach and imaginative stand taken by the State Government. This bodes well for future development.

On the subject of employment, the Budget does not mention the problems faced by one of Tamil Nadu’s major industries — textiles and garments — as a result of shrinking export opportunities based on exchange rate variation and the rupee appreciation. Obviously, the Government of Tamil Nadu considers this as matter within the domain of the Centre.

But it would be perfectly reasonable to expect that the Government of Tamil Nadu will take measures to stress on the Government of India the need to address the grievances of the section of the industry, which is a large employer of both skilled and unskilled labour and whose destabilisation causes hardship to various parts of Tamil Nadu. What the State can do on its own is obviously limited. But it can press the Centre to take action. Further initiatives in this sector are necessary to prevent the snowballing of difficulties in the industry.

Strengthening record

The Budget has indicated initiatives regarding the nutrition programme and ICDS. This takes me back to the late 1960s and 1970s when I was privileged to be the Finance Secretary of Tamil Nadu and the present Chief Minister initiated a programme that later blossomed into the All-India Integrated Child Development Services programme. Tamil Nadu has been for long a leader in the integration of nutrition and health services, especially for children and pregnant women.

The initiative in 1969-70 also led to the development of the Tamil Nadu Nutrition Improvement Programme, funded by IBRD. This programme has been hailed as a world leader in nutrition improvement. It has to be hoped that this strong record will be improved upon by raising the level of attention given to integrated child health and nutrition services in the future too.

Pay panel recommendations

As mentioned in the Budget speech, the State faces fresh challenges, especially in the light of the recommendations of the Sixth Pay Commission, which will have significant repercussions on State Governments as well as the Centre.

Fortunately, salaries as a percentage of revenue expenditure in the State are at the level of 33.62 per cent and not higher, although one would expect the burden of salaries on teachers, which are borne by local bodies initially and ultimately fall on the Government of Tamil Nadu, would contribute a higher share. The way to handle the Pay Commission problem is to implement the recommendations of the Sixth Pay Commission not only in letter but also in spirit.

That is to say, Government has to take note of the Pay Commission’s useful suggestions regarding better performance of Government employees, including resorting to outsourcing certain levels of Government employment.

These may, however, be politically unpalatable, although financially desirable. Hopefully, the State Government will find a via media while implementing the Sixth Pay Commission’s Report, without violating the canons of financial prudence.

Overall, the Budget is a credible effort, which pleasantly surprises observers by being fiscally responsible while maintaining its record of new and imaginative popular initiatives.

It is to be hoped that the State Government will continue to maintain its record of service and robust development, marked by compassionate concern and a devotion to higher standards of governance and ultimate outcomes.

It is by outcomes that a budget is judged. Implementation is the key to success of economic policies and the Budget should hopefully score in this respect.