CHENNAI: "We are not expecting Delhi to be our saviour. What we want is fairness, predictability and a good partnership that allows for independent decision-making," said Tamil Nadu Finance Minister Palanivel Thiagarajan.
He was participating in a discussion with Montek Singh Ahluwalia, former chairman of the Planning Commission at a session moderated by Prabhu Chawla, Editorial Director, The New Indian Express at the tenth ThinkEdu Conclave on March 9.
Talking about the disparity in the devolution of funds between well-developed states and other backward states, he said in India, the transfer of wealth from the better states to poorer states has not helped to close the gap in inequality but has instead widened it. “Successive finance commissions have reduced funds to states like Tamil Nadu. From China to the US and Europe, with such transfer mechanisms, the gaps have narrowed or are stable. When it keeps widening at an accelerated rate, it raises questions about where the resources are invested and what is being done wrong in certain states," he added.
"This system has been an utter failure. The government should incentivise things like women empowerment and education instead, which would drive the growth and create harmonious societies,” he added. He went on to say that the Tamil Nadu government doesn’t consider providing laptops, uniforms, free food to students as freebies, instead considers them as an investment on human resources. He also questioned how the Central Government can presume that they can bring one homogenous programme from Delhi and impose it on 1.4 billion people.
When questioned why the state is lagging behind in the ease of doing business, Thiagarajan acknowledged that improvement in areas is required and red tapism should be done away with. “After the DMK Government took over, we have set up a task force for this purpose which will not only concentrate on multinational companies, but also MSMEs,” he said.
Elaborating on the artificial constraints imposed even on well-developed states like Tamil Nadu, he said that the state is spending Rs 6,000 to 8,000 crore in capital infrastructure due to artificial constraints manufactured by the Centre. "The borrowing limit based on various acts is 4.5 per cent of the Central Statistical Organisation's (CSO) estimate of Gross State Domestic Product (GSDP). This is then revised mid-year. However, the borrowing limit is set at Rs 6,000-8,000 crores less from what the CSO says is 4.5 per cent of Tamil Nadu's GSDP," he mentioned. It is because when they add the GSDPs of all the states, it is about 5 per cent higher than the national GDP. "Therefore, to set the total borrowing of all states into some number that the rating agencies would like, they cut our borrowing limits down. Due to this, all the states combined, we are investing Rs 50,000 crore less in the capital investment," he further said.
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When asked why the Tamil Nadu economy is in line with other states, Montek Singh Ahluwalia said that an industrialised, urbanised and globalised state like Tamil Nadu can lead the country. Advocating that banking should be moved out of the public sector, he said that we are the only country in the world that has 70 per cent of its banking in the public sector. “The public sector does not give managers the trust and flexibility to handle risky decisions,” he added.
“Get rid of the idea that the public sector must occupy the commanding heights of the economy. This has now changed. Next, growth in a modern economy is going to be led by the private sector so you need to provide an environment where they can flourish,” said Ahluwalia. He added that to prevent the private sector from overwhelming the system with cronyism, the government should keep the economy open so that the private sector competes globally. “We saw a clear signal in 1991 that the Indian industry, given the right environment, can compete. However, in the last three or four years, we have seen an increase in customs duties, a reversal of the 30-year trend, that may pose a challenge for private industries to compete,” he added.
While it is said that historically the Congress was never happy with privatising a public sector unit, subsequent governments have been more open to privatisation, though it is being done slowly, he commented.