CHENNAI: Tamil Nadu's economy will rebound to the pre-COVID-19 period in two months, former Reserve Bank of India (RBI) Governor C Rangarajan said on Monday.
There is likely to be a contraction due to the pandemic, Rangarajan, heading a high-level committee to advise the State government on the medium-term response and measures to be taken to boost the economy post the lockdown period, said.
The committee was tasked by the Tamil Nadu government to assess the impact of coronavirus crisis on the State's fiscal situation and the way forward to improve the position, including increasing the tax-GDP ratio, diversifying revenue sources and re-prioritising expenditure.
The panel, which submitted a 250-page report to Chief Minister K Palaniswami on Monday, is optimistic the economy will revive in about two months' time.
The committee, which made several recommendations, suggested to the state government to launch an urban employment guarantee scheme on the lines of the rural one to address job loss and increase the employment opportunities in cities.
It also favoured the immediate utilisation of Rs 3,200 crore available with the construction workers welfare fund to generate employment opportunities.
"It is difficult to predict exactly, but indicators like GST collections, petrol and power usage indicate a return to growth," Rangarajan said while ruling out any suggestion for increasing the taxes this year.
"There is no scope for it. Everyone is demanding reduction in taxes," the former RBI Governor told reporters after presenting the report to the chief minister at the Secretariat here.
"While one estimate says that in 2020-21, Tamil Nadu's growth rate will be 1.71 per cent, another predicts there could be a contraction due to the pandemic. At this juncture it is difficult to predict the exact growth rate," he said when asked on how the growth rate will be.
However, GST collections and petrol and electricity usage indicate the state is heading to the pre-COVID-19 period in the next two months, Rangarajan said.
The committee has also recommended that the free distribution of rice to ration cardholders should be extended beyond November, an additional Rs 5,000 crore should be allocated to the Revenue department, and increase capital expenditure by Rs 10,000 crore.
Stating that the lockdown to curb the spread of the coronavirus had affected the economic growth, Rangarajan said other measures should be taken to stop the virus spread. "The earlier we come out of the lockdown, the better it will be for Tamil Nadu's economy," he said.
Chief minister Palaniswami had on May 9 constituted a high-level committee under the chairmanship of Rangarajan, currently Chairman of the Madras School of Economics.
State Finance Secretary S Krishnan was the coordinator of the 24-member committee, which interacted and sought views from industry bodies, trade associations, stakeholders, economic and other experts in India and overseas.
The panel's members include N Narayanan, former Chief Secretary and industry titans like A Vellayan, N Srinivasan, Venu Srinivasan, bankers such as Padmaja Chunduru, MD, Indian Bank, M Suresh Babu of IIT Madras, Pinaki Chakraborty, Co- ordinator, UNICEF, Chennai, and senior officials from various state government departments, including finance.
Palaniswami thanked the committee for promptly responding to the government's request and coming out with a comprehensive report on the economic revival. "The government will examine all the recommendations and take appropriate steps," the chief minister said.