CHENNAI: The COVID-19 pandemic may have hit economies across the world hard but Tamil Nadu policy makers are working on strategies to weather it and ensure the state's economy sails smoothly.
Tamil Nadu, which clocked a higher economic growth rate than the national average for three consecutive years, was badly hit by the lockdown enforced to prevent the spread of COVID-19.
A top government official told The New Indian Express that in April, the state managed to mop up Rs 2,052 crore, a drop of 75 percent compared to last year when the revenue earned was Rs 8,544 crore.
“The recovery has been rapid since then,” said the official highlighting how the COVID-19 strategy of conducting more tests paid off.
From April to July 2020, there has been a dip of 39 percent when taking into account the figures last year during the same period. According to official sources, the state revenue collection during the first quarter last year was Rs 33,302 crore while that during the first quarter this year was Rs 20,353 crore.
The credit is being attributed to the strategy of combating COVID-19. Tamil Nadu was aggressive in testing its population which was much higher when compared to other states. The massive tests even caused jitters among some businessmen who were afraid that the rise in cases would be detrimental to the state's image and brand. But policy makers went ahead with the testing.
“We were the only state to do RTPCR tests rather than going in for other tests,” says the official. And this paid off in controlling the pandemic and ensuring the confidence of international agencies like the World Bank, Asian Development Bank, JICA and Asian Infrastructure Investment Bank.
While the state’s share of central taxes and of grants from the central government (which include a revenue deficit grant of Rs 40 billion, equivalent to 0.2 percent of GSDP, awarded by the Fifteenth Finance Commission) may be delayed due to COVID-19, the state hopes to manage as it has been permitted to increase borrowing levels. “We will be getting loans at a reasonable rate,” said the official.
Meanwhile, it is learnt that the state government's medium-term fiscal statement, presented in mid-February 2020 together with the state’s financial year 2020-21 budget, contained an optimistic narrative at a time when the impact of the COVID-19 pandemic was expected to be modest and short-lived.
In the fiscal statement, the fiscal deficit was expected to narrow gradually until financial year 2022-23 from just under 3.0 percent of GSDP in financial year 2019-2020 to 2.8 percent in financial year 2020-2021 and further to 2.6 and 2.5 percent in financial year 2021 - 22 and 2022 - 23, respectively. But the projections have been put on the backburner as the pandemic which was expected to last a month or so has now been hovering for nearly five months.
Interestingly, Tamil Nadu constituted a high-level committee headed by former Reserve Bank of India governor C Rangarajan to assess the overall impact of the pandemic on different sectors of the state economy. The committee will be able to give a forecast about the state’s economy, said the official.