A limited operation

IN PRESENTING THE first State budget since the AIADMK came to power, the Tamil Nadu Finance Minister, Mr. C. Ponnaiyan, has carried out an operation that addresses only one aspect of the State's financial situation. By exercising the rather limited options before him on the revenue mobilisation front, the Finance Minister has attempted to strike out a path to narrow down the overall deficit. Yet, the Tamil Nadu Budget for the year 2001-02 has not shown boldness on serious issues that are the focus of policy-makers concerned about the State's financial difficulties. The expression of intent to address politically sensitive issues, such as expenditure reform and food subsidy, through specialised committees should be taken to its logical end. However, the message behind the Rs. 692-crore deficit budget is that the new Government has chosen to continue with existing precepts that dictate the arduous task of managing public finance rather than plunge into courageous and imaginative steps that could usher in long-term correctives. In a way, the advantage of presenting the first budget of a new regime has been missed in that the AIADMK Government has let go of the opportunity to set out a well defined perspective on how it manages to effect course corrections to the State's finances in the years ahead.

In handling commercial taxes - the single largest source of revenue for the Government - Mr. Ponnaiyan has taken further steps towards rationalisation. However, in some respects, there are bound to be difficulties in translating the proposals. The intention to levy an entry tax on certain products is a case in point. The additional taxation measures, which are expected to bring in Rs. 135.38 crores, are to be seen as part of the measures that are required to arrest the sliding financial situation. The difficult issue of reining in revenue expenditures, however, remains largely unaddressed. The challenge ahead lies in finding measures to check the revenue deficit, estimated at Rs. 3,748 crores. There may be some justifiable angst on the State Government's part that much of these problems are exogenous. However, it is imperative that States recognise that developments such as the wage revisions as recommended by the Fifth Pay Commission and the award of the Tenth Finance

Commission are part of the larger restructuring that the national economy is going through. It is also appropriate that the steps taken by the State Governments are as synchronous as possible with the efforts by the Union Government on issues such as economic restructuring.

As a vibrant link between economics and politics, the Budget mechanism could have come in handy to address the main challenge ahead: that of re-inventing the economic role of the State. The decision to present a White Paper on the Tamil Nadu Electricity Board is, indeed, welcome. This should be followed by another comprehensive public document on the working of the State's public sector undertakings. Such an exercise is vital in that it will form the basic prerequisite for setting out the larger correctives that will have an impact on the State's finances. It is imperative that the State Government adheres to the advice rendered by the Union Planning Commission, as well as to the suggestions made by studies on the adverse implications of a continuation with the present system of public enterprises. Such exercises at restructuring the public sector are unavoidable in the changed economic setting and it will be in the best interests of the State if the Government transcends the confines of the status quo and ventures into bold and imaginative policies aimed at comprehensive economic development.

Send this article to Friends by E-Mail

Section  : Opinion
Previous : Non-legislators and ministerial posts
Next     : The struggle for Israel's soul