For a better experience, Read this story in our App
TO ENJOY ADDITIONAL BENEFITS
Connect With Us
Get BusinessLine apps on
Palanivel Thiaga Rajan, TN Finance Minister speaking at the inaugural session of the 12th TN CII Tamil Nadu Finance Conclave, in Chennai on Wednesday | Photo Credit: BIJOY GHOSH
Tamil Nadu Finance Minister PTR Palanivel Thiaga Rajan said on Wednesday the state’s capital expenditure (capex) will more than treble over the next three years as both revenue and fiscal deficit indicators are “well under control” .
“The trajectory that we have is, either next year or the year after, we will meet the revenue-neutral target of the Fiscal Responsibility and Budget Management (FRBM) Act. If we do that and the economy stays the way it is, then our capex is going to grow 2-3X in a period of three years,” Rajan said as part of his inaugural address at the 12th TN Finance Conclave organised by the Confederation of Indian Industry (CII).
He added that from ₹25,000 crore a year currently, the state’s capex will go to ₹90,000-95,000 crore a year in three years.
Rajan said the state’s fiscal situation had deteriorated so badly over the years that it was unable to deploy the level of capex it used to earlier. “There were times when Tamil Nadu used to do capex spending of 3.5-4 per cent of GSDP [gross state domestic product] but that dropped continuously since 2014, reaching one per cent during the Covid-19 pandemic.” He said that last year the capex improved to 1.5 per cent of GSDP and the government aims for 2.5-3 per cent this year.
He was, however, concerned that the execution capacity needed for that kind of jump had been eroded by the decaying fisc and capex over the last several years.
Palanivel Thiaga Rajan, TN Finance Minister and Gopal Mahadevan, Convenor, Economic Affairs & Policy Advocacy Panel, CII TN at the inaugural session of the 12th TN CII Tamil Nadu Finance Conclave, in Chennai on Wednesday To go with Narayanan’s report | Photo Credit: BIJOY GHOSH
The State finance minister said the public–private partnership (PPP) model is better for some capex projects as the state can benefit from the execution expertise of the private sector, besides joint investments. “But we are not here to build things and sell them to them because we need money.”
He said the government is clear that there are sectors where only the government should operate and others where the private sector can bring expertise in execution and maintenance.
Rajan said that despite coming to power in the midst of a brutal second wave of the pandemic, the government was able to quickly contain the fiscal and revenue deficits. After eight years of increasing revenue deficits, it was brought down to ₹16,000 crore and, consequently, fiscal deficit as a percentage of GSDP has also dropped to 3.38 per cent, which is half per cent less than the 3.85 per cent target set by the Union government. He added that the low fiscal deficit also allows the state to rollover the borrowing capacity from last year to this year, as per the terms of the Fifteenth Finance Commission.
“The state is on track to repeating good performance, assuming the economy stays at the same pace it has been year-to-date,” Rajan added.
He said that since assuming office, he has actively participated in every State-Level Bankers’ Committee (SLBC) meeting to improve access to credit for micro, small and medium enterprises.
He said, overall, Tamil Nadu is an above 100 per cent credit-to-deposit state, which means every rupee taken as deposit is extended as credit. He said that while this is good news, the bad news is that banks meet the target every year, they only see the volume of the target or credit extension but fall far behind in the number of industries or clients covered. He said they should use better technology to improve their KYC (know your customer) and credit committee approval process to expand their client network and bring more people into the fold.
“Emerging players like fintechs offer a huge opportunity in these areas,” he said.
On the economic outlook, Rajan said that after the fiscal stimulus that most governments undertook during the pandemic, “we are now seeing unprecedented inflation because we are having the combined effect of a few trillion dollars of fiscal stimulus and $8 trillion of excess liquidity”.
The state has taken appropriate fiscal measures and, even if there is a global recession, Tamil Nadu will still perform better and be protected from the downsides than most other states.
Published on December 7, 2022
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.