Economy

A Budget that doesn’t break new ground

Abdul Majeed S Mahalingam | Updated on March 15, 2018

In an article (‘State Budgets Matter Too’) we wrote two days back, we had argued that the Tamil Nadu Budget must create an architecture for better financial management and for supporting new growth drivers.

In order to bring that about, revenue deficits should not be made up through capital surplus, which has been the consistent approach of budgets over the years.

The Tamil Nadu Budget presented on Thursday does not deviate from the traditional approach. There is revenue deficit of the order of ₹17,491 crore. Fiscal deficit stands at ₹44,481 crore, which is 2.79 per cent of the GSDP, enabling them to come within the mandated target of 3 per cent .

We do not know if the full increase on account of the Seventh Pay Commission has been provided for, as the salary is projected to go up by just ₹6,000 crore.

Revenue deficit

It would be difficult to control expenditure; therefore, the revenue has to go up if the State budget should attempt to bridge the revenue deficit.

Given the expected real GSDP growth of 8 per cent in FY18 and the projection of upwards of 9 per cent in FY19, there is reason for optimism on this account.

The State should also manage the revenue drivers well, as we had argued in our earlier article. There is no indication in this budget for improvement in the management of State undertakings which are acting as a drain on the exchequer.

There is a need to rationalise the areas in which State undertakings need to focus (i.e. other than public service areas), and focus on delivery systems, especially in areas like healthcare and education, to ensure better results/performance.

There are other assets that the State has, such as land and minerals, and there has to be a process of leveraging them for revenue transparently. The Budget does not describe any initiative to deal with revenue growth drivers. Also, the revenue debt and government debt is increasing year on year.

Ultimately, there should be a lot more accountability for performance.

Sadly, the practice of placing before the Assembly a performance report has been discontinued.

We agree that the State budgets have to cater to the demands of many industrial segments, ensure the setting up of supply chain through MSMEs, should be broadbased in their regional approach and should also be seen to be “welfarist”.

Missed opportunities

While the TN Budget follows the tried and tested methods for fund allocation, we do not think it has exploited the opportunities provided by better broadband connectivity to usher in new industries and create a vibrant environment for start ups.

TN’s Vision 2023 is a great document and realisation of it will need innovative steps.

The Budget has been “traditionalist”, and does not break new ground.

S Mahalingam is Chairman of Economic Affairs & GST Sub-Committee of CII Southern Region; Abdul Majeed is Partner, PriceWaterhouse

Published on March 15, 2018

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