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Little surplus after salaries, subsidies and debt servicing

The Tamil Nadu budget for 2013-14 continues to focus on welfare. But, the absence of thrust on development, particularly reforming the agriculture sector to increase production, is a matter for concern.

The Finance Minister pointed to an allocation of Rs 2000 crore for the infrastructure development fund. But related to a total investment of Rs 15 lakh crore over the next ten years indicated in the Vision 2023 document, this amount seems to be too modest. 


Tamil Nadu Finance Minister O Panneerselvam had presented a no tax budget for 2013-14. The budget showed a revenue surplus of Rs 664.06 crore (0.56 per cent of total revenue), but a fiscal deficit of Rs 22,938.57 crore. 
The budget estimates revenue receipts of Rs 118,579.87 crore comprising state’s owned receipts of Rs 92,830.50 crore and receipts from the Centre through share in taxes and grants of Rs 25,749.37 crore.

Salaries, pensions and subsidies form a major chunk

Revenue expenditure continues to be higher estimated at Rs 127,933.51 crore. Nearly Rs 50,000 crore of this is accounted for by salaries and pensions. Interest payments continue to account for a sizeable amount of Rs 13,584.93 crore. Subsidies and cash transfers are estimated at Rs 45,176.06 crore. Thus, capital outlay continues to be modest at just Rs 22,505.14 crore. 
In his speech lasting close to 150 minutes, the Finance Minister dwelt at length on the difficult fiscal position caused by delayed and deficient monsoon and non-release of 
Cauvery waters by Karnataka resulting in a drought situation. All districts of the state, except Chennai have been declared drought affected and land revenue has been waived. This has enabled the state to increase eligibility for employment under MGNREGS providing for employment up to 150 days per annum per family. 

A matter for concern is the slowdown in economic growth. The Gross State Domestic Product (GSDP) is estimated to have increased at 4.61 per cent at constant prices during 2012-13. This is nearly half the growth rate estimated for the previous year and is in line with the fall in growth rate for the nation as a whole estimated at 5 per cent. Drought and crop failure impacted the primary sector which in turn affected the services sector growth and the shortage of power hampered growth in the manufacturing sector, the Finance Minister said. 

The state plans to step up plan outlay for the coming year to Rs 37,000 crore over the Rs. 28,000 crore of 2012-13. 

The budget proposes to distribute two lakh house site pattas during 2013-14 (1.2 lakh house site pattas distributed up to February 2013 during 2012-13). The Finance Minister pointed to an allocation of Rs 2000 crore for the infrastructure development fund. But related to a total investment of Rs 15 lakh crore over the next ten years indicated in the Vision 2023 document, this amount seems to be too modest. 

Imperative to revamp agriculture 

Though over the years allocation for agriculture has been registering significant increases, outcomes have not been commensurate. The state’s contribution to total food output has been declining over the years. IE has been suggesting a sharper focus on the selection of crops suited to the agro-climatic endowments. With land holdings so much fragmented, agriculture ceases to be viable. There is urgent need to agglomerate land holdings to viable sizes. Punjab and Rajasthan governments have provided for leasing land for 15 years and more without 
alienating ownership. The state would do well to adopt this measure, which can help in the application of science, technology and management, which alone can improve productivity. 

Rs 4900 crore for food security

Traditionally Tamil Nadu has been known for its focus on food security. Under the universal public distribution system the state provides free rice to all rice cardholders. The budget has allotted Rs 4900 crore for food subsidy. The state also supplies toor dhal and urad dhal (each at Rs 30 per kg) and palm oil (Rs 25 per litre) at subsidised prices under the special PDS. The budget proposes to continue this for another year. The budget also proposes to off load one-lakh tonnes of rice in the open market at Rs 20 per kg through cooperatives and special outlets. 

The severe power shortage has impacted industry the most. There is a concentration of the automobile industry in the state. But the fall in demand for vehicles has further impacted on their working. With land prices registering steep increases, the two strong sectors – engineering and IT – have been losing interest on investing in the traditionally attractive Chennai Metro. 

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