TVK government in Tamil Nadu faces a fiscal test in balancing populism and prudence
The Tamilaga Vettri Kazhagam (TVK)-led government is facing the same predicament with regard to public finances as the first post-Independence Congress government, headed by C
The Tamilaga Vettri Kazhagam (TVK)-led government is facing the same predicament with regard to public finances as the first post-Independence Congress government, headed by C. Rajagopalachari (Rajaji), did in 1952: how to balance welfare schemes with fiscal prudence. This, despite the passage of time and the scale of budgetary outlay having gone up manifold. Presenting his maiden Budget on June 27, 1958, then Finance Minister C. Subramaniam (C.S.) said the State would have, at the end of 1952-53, a deficit of ₹3.59 crore. According to the White Paper of the TVK regime, this year’s revenue deficit “could reach roughly” ₹90,500 crore. The new government’s first Budget is expected to be tabled in the Assembly in a few weeks. There are, of course, differences between the early 1950s and 2026. Apart from the State being much bigger then what it is now, successive droughts had troubled the Congress regime at the time. In fact, then Govenror Sri Prakasa, in his customary address to the legislature made on the same day of the Budget presentation, had referred to the “welcome rains” in the third week of May (The Hindu, June 28, 1952).
Rayalaseema, now a part of Andhra Pradesh, was a constant area of concern to those in power then. In the field of taxation, the Goods and Services Tax, which is in its 10th year of implementation, has virtually robbed States of their freedom to levy taxes. Only in limited areas such as petroleum and liquor do the States have the power to have taxes of their own. However, C.R. had a perceptive take: “While there need be no limit to the amount that can be spent by a Welfare Department, there is a natural limit to the growth in the revenue of the State because the latter must necessarily come out of the taxable margin in the per capita income of the citizen,” he told the Legislative Council, while presenting the Budget on behalf of his colleague, C.S. The Chief Minister made one more statement of relevance to the present times: “We can have a welfare State only if we work for it and step up production.” On the approach towards new schemes amid a tight financial condition, Subramaniam, in a talk on the All India Radio later in the day, said: “...the transactions of last year resulted in a revenue deficit of ₹329 lakh (or ₹3.29 crore), and early enough I could sense that the current year would also show a deficit of the same order.
When this position emerged, what could I have done? One course open to me was to cut down expenditure all round and put a ban on all new schemes but that is not desirable in a welfare state,” according to another report of this newspaper on June 28, 1952. After 74 years, the TVK regime is sailing in the same boat. It appears to be clear that fiscal consolidation and the launch of welfare schemes, however limited, are “not mutually exclusive.” Without disclosing much, a representative of the government says “we have already committed ourselves to some welfare schemes. They will continue.” It may be recalled that the TVK regime has committed to increasing the quantum of free electricity to 200 units from 100 units for domestic consumers consuming up to 500 units bi-monthly and waiving crop loans up to ₹75,000 taken by farmers from cooperative societies, irrespective of the size of landholdings. The “one-gram gold ring” scheme for babies born in government hospitals will be launched on September 15.
The BriefWire