The hallmark of the Tamil Nadu model is the human capital and a harmonious society, said the Minister of Finance, Tamil Nadu P Thiaga Rajan speaking at the 11th edition of The New Indian Express' ThinkEdu Conclave 2023 in Chennai on Thursday, February 9, on the topic - The Tamil Nadu Model: Lessons for India, chaired by author and analyst Shankkar Aiyar.
He said that the focus on human development sets apart the Tamil Nadu model or what would have been called the Justice Party model going back to the 1930s. Explaining how having social justice at the core of everything has helped the state, he said, "In a stratified society, where education and opportunities are restricted for some, you can't have a weighted average productive workforce. We could not have envisioned then that 100 years from the first Justice Party government, we would have a global economy and weighted average productivity that would be the single best predictor of your competitiveness. We wanted education and opportunity for all. The original legislation for compulsory elementary education was passed in 1921 to provide equal education for boys and girls. In some sense, that's very similar to Singapore.
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Commenting on the 'Revdi culture debate,' he said that the first question that comes up is who decides what is populist. "Some of the freebies will be accretive. Some will have mixed outcomes - they will add some value and also create inflation/some other problems. So these things need to be thought of carefully," he said. He also cited examples of the free cow distribution scheme which was unimplementable, how the MGNREGA scheme would create inflation in cases where people are paid without doing any work and the gold for marriage scheme of the AIADMK government which became infructuous as there was a four-year delay in distributing the gold.
He said that providing free television was also on the principle of social justice but it provided ancillary benefits that were not expected. "Then CM Karunanidhi wanted to make sure that nobody had to stand outside other people's house and watch television," he said and added it had additional benefits wherein rural people started becoming aware of the world and it increased presence of women in the workforce.
Replying to the question that Tamil Nadu spends Rs 1 lakh crore in subsidies while the total expenditure of all the states put together on subsidies is Rs 3 lakh, he said that the state's finances were in a really good shape with schemes that are considered freebies since the Fiscal Responsibility & Budget Management (FRBM) Act was passed in 2014. However, there was bad economic management in the last six to seven years. "Last year, we showed a huge improvement in the debt-to-GDP ratio. This year, there will be another huge improvement because I am making the budget numbers ready. About 90% slide of seven years would be wiped out in two years. We have not changed our philosophy that human development would be at the core of it," he said.
Comparing the midday meals scheme and the morning breakfast scheme introduced by the DMK recently, he said that more than 50-60% of funding is spent on salaries in the midday meals scheme. "We have involved the mothers of the children through self-help groups to prepare the meals. Funding is provided through local bodies. In urban areas, we maintain the quality and hygiene of central kitchens. We received great feedback for this but people asked why are you not doing that for the rest of the schools," he said.
He added that while they have greatly improved the delivery model, the principle remains the same. "We want to feed the children because that is the greatest investment we can make in our future. Our model of success starts with - letting us get well-fed, well-educated, healthy human beings, the rest of it will fall in place. Another model will say let me build roads, let me build ports and then they will come. That is the union's model," he said.
Talking about the bad financial condition of the public sector unit, he said that they have been mismanaged. To rectify it, the government has made taking approval from the state government through the Bureau of Public Enterprises of the Finance department mandatory for major decisions, in addition to the board, he said. "Since many of the PSUs were submitting the reports late, we have now created websites and boards of the companies have to at least report internally to us for a local audit in a timely manner," he said.
The minister added that fiscal deficit was 5.21% before DMK took over out of which 3.25% is the revenue deficit. "Based on the reports already submitted in the assembly, we will now be trending towards...1 or 1.25% revenue deficit. In a growing economy, it is the job of the government to borrow up to 3% and borrowing for capital expenditure is a good thing," he said. He stated that with the right environment, talent and reasonable ease of business, one can get an unlimited amount of investment.
"We have now come to a point where we were last year and most likely we are going to miss the capital expenditure target. Not because we didn't have money but because we couldn't execute fast enough. If we are on this trajectory, we will be a revenue-neutral state by 2024-25 or the next year. At that time, our GSDP will be 30 lakh crores and we will have to spend Rs 90,000 crores or Rs 1 lakh crore. For that, I think we have to look at Public-private partnerships (PPP) models. We have to look at people who are willing to put their capital and skin in the game, not because we need the capital, but because we need the talent, discipline, professionalism and execution skill," he said.
When asked about his review of the Union Budget presented recently, he said that what worries him a lot about the union government is that they say they say they are for the poor but the numbers do not reflect it. "Broadly, I would say that the twist away from progressive taxation and progressive spending (more to the poor and more from the rich) is antithetical to my approach. At the end of the day, a budget is only a statement of intent. We will know what was achieved when the final account comes out. I would have tried to make the taxation regime more progressive. Right now, too much of the tax revenue comes from the poor and middle class and too little comes from the rich," he said. He added that BJP or BJP coalition governments also ask questions regarding taxation at the meeting of finance ministers with the union finance ministers.
For being called the voice of dissent, the minister said, "I am the establishment. I am the finance minister in a large industrial state, one of the biggest economies in the country. If I am seen as a voice of dissent, something is structurally wrong." Replying to the question that his replies have become diplomatic, he quipped, "Maybe, I am growing up."
