Socially Compassionate And Fiscally Responsible

When Chief Minister and DMK President Kalaignar M.Karunanidhi unveiled DMK’s Election Manifesto for the 2006 Assembly elections many were apprehensive whether the promises were realizable. The political circles thought the manifesto was not seriously intended for follow-up actions after winning the polls, as the general practice till then was the election manifestos of political parties in democratic polity were meant for a day’s show by leaders and news for the media for one day, whereafter the political parties as well as the media forget them. But, for the first time in the electoral history of the country, possibly the world, DMK’s election manifesto was turned into the main plank of election campaign by the DMK and its allies that Union Minister Thiru P.Chidambaram called it as “the hero of the elections”. Jayalalitha poohphooed it saying “they are promising the moon… their promises are meant to hoodwink the people and not realizable.” Some commentators went to town attacking Kalaignar for alleged fiscal irresponsibility. ‘He was exceeding all limits’ alleged the ‘experts’. As it happened, however, the sceptics (like Jaya) and ‘experts’ were proved wrong.

The very first budget for the year 2006-07 that Finance Minister Prof. K.Anbazhagan presented to the Assembly on July 22, 2006, incorporated the schemes and provisions Kalaignar had unveiled in the manifesto, but the Budget estimates did not violate any of the limits laid down in the fiscal responsibility legislation. That was, indeed, remarkable and reflected the prudence that generally marks the Chief Minister’s actions.

From then on there was no turning back and every budget presented thereafter contained not only allocations for implementation of the poll promises but also new announcements and new schemes with provisions there of adding to the Party’s motto of ‘we will do what we say; we will say what we did’ one more sentence ‘we will also do what we did not say and do them in time’, as it had turned out in the Interim Budget presented last week on Feb.4.

Kalaignar had clearly calibrated his promises to be in full accord with the State’s revenues. If the fiscal deficit in the budget for 2006-07 stood at 3 percent of the State’s GDP, it was brought down to just 2.54 percent in the interim budget estimates for 2011-12. Comparatively it was much lower than the figures of 3.28 percent in 2003-04, 4.36 percent in 2002-03 and 3.3 percent in 2001-02 under ADMK regime, when Jayalalitha withdrew all social welfare schemes and the monetary benefits of the government employees in the pretext of fiscal discipline to overcome fiscal crisis. These figures showed that there had been a conscious effort to contain the fiscal deficit in spite of increased commitments to expenditure on schemes and announcements in the manifesto and beyond. There had been full provision for all expenses associated with various schemes and nothing was left to be carried over to next fiscal. A substantial part of the fiscal deficit was still rightly directed to investments not giveaways.

On account of waiver of co-operative loans to farmers to the tune of Rs.7,000 cr. as promised in the manifesto, the budges for the last five years showed that the government had taken over the entire debt liability owned by the co-operatives to NABARD and made good the loss caused to co-operative banks. There was also burden of reduction of interest from 9 percent to 5 percent and total waiver in case of prompt repayment. What is remarkable is that these costs have been absorbed in the revenue account without hurting the fiscal responsibility ceiling on revenue or fiscal deficit.

The Chief Minister is far too experienced a statesman to set at risk the future of Tamil Nadu farmers, if he finds the decision to write off the loans leads to a fall in bank credit. The government’s approach was obviously designed to prevent the tragedies that various other states had witnessed in the form of farmers’ suicides due to their crushing debt burden. The answer obviously lies not only in reducing the burden of loan repayment but also enabling more remunerative prices to producers. To this end, procurement price of paddy which was Rs.570 per quintal for common variety and Rs.600 for fine variety was gradually increased to Rs.1,050 and Rs.1,100 respectively, and that of sugarcane from Rs.1,014 in 2005-06 to Rs.2,000. For solution to farmers’ problems one has to look out of box beyond write off loans. With this in mind the government had expanded Uzhavar Sandhai scheme.

This interim budget had allocated for food subsidy - Rs.4,000 cr. Kalaignar Housing Scheme - Rs.2,632 cr., Power subsidy – Rs.1,421 cr., Nutritious Meal programme – Rs.1,207 cr., Integrated Child Development scheme – Rs.991 cr., Kalaignar Health Insurance Scheme – Rs.765 cr., Chennai Metro Rail Project – Rs.754 cr., Maternity assistance and Marriage assistance schemes – Rs.697 cr., Hogenakkal Combined Drinking Water Supply scheme – Rs.400 cr. and MLA’s Local Area Development scheme – Rs.400 cr. All these costs had also been absorbed in the revenue account.

The budgets of the previous 5 years and the interim budget showed allocation for school education at Rs.39,405 cr. and Rs.12,674 cr. respectively, for higher education @ Rs.6,414 cr. and Rs.2,135 cr.; for public health @ 15,592 cr. and Rs.4,554 cr. – the costs invested in human resources development in farsight. So also for Rural Development it provided Rs.27,353 cr. in five years and Rs.8,812 cr. for 2011-12.

The budgets showed that the government spared no pains to make investments in various sectors meet the plan objective. The investment outlays showed healthy increases. Business confidence was enhanced so that investment inflows complemented government investments in infrastructure development. As a result progressive industrial policies followed by the government ever since it assumed charge, many leading industries have made investments worth Rs.52,195 cr. Manufacturing sector has grown at an average rate of 8.4 percent from 2007 to 2009 and 12 percent in 2010. As companies such as Dell, Nokia, Siemens and Moser Baer have commenced business in the state, it has become the leading state in the production of computers and electronic hardware in the country. Similarly, IT majors have invested heavily in software, with Tamil Nadu’s share at 11 percent in investment and production in IT sectors in India. The state has been proving itself as preferred destination of choice to investors both in manufacturing and knowledge industries.

How was all these possible, particularly with no meaningful development and nil expenditure in social sector during the previous ADMK regime?  Kalaignar had no magic wand to bring financial resources, which Jayalalitha claimed was inadequate. By comparing the interim budgets for 2006-07 presented by the outgoing ADMK regime and the one for 2011-12 presented now, the secret is made obvious. The total revenue receipts estimate for 2006-07 presented by the ADMK government was Rs.30,251.53 cr. of which state’s own tax revenue estimate was Rs.20,650.83 cr., non-tax revenue - Rs.2,101.41 cr., share of Central taxes - Rs.4,672.66 cr. and grants-in-aid from Centre - Rs.2,828.83 cr. This was the position inherited by the DMK government and now on completion of five-year tenure, Kalaignar rule leaves for 2011-12, total revenue receipts estimates at Rs.79,413 cr. (nearly 3 times more than in 2006) with state’s own tax revenue at Rs.53,783 cr. (nearly 3 times more than in 2006), non-tax revenue at Rs.4,811 cr., share in Central taxes at Rs.13,375 cr. and grants-in-aid  from the Centre at Rs.7,445 cr. This comparison shows not only the efficiency of the DMK government but also tax evasion for ‘consideration’ of the powers at the helm during ADMK regime.

The Interim Budget for 2011-12, as the earlier five budgets from 2006-07 is politically adroit socially compassionate and fiscally responsible and will mark the successful journey to a bright and prosperous future for the state, if the course is sustained in the years to come.