Sabtu, 05 April 2014

Get the poor to subsidise the poor

I am not sure what the Tamil Nadu government is. A bootlegger ? A bottomless pit ? A great implementer ? A humane  carer of the unfortunate ? A bunch of eunuchs in the court of a megalomaniac ? All of the above ? Read on.

I was tempted to take a one post detour from the economic manifesto for the country as a whole, to shine a spotlight on Tamil Nadu. This was prompted by a comment from myfloatingthoughts asking for an opinion on the freebies and other doles that bedevil this state. When I examined the financial situation of Tamil Nadu, it is a complex nuanced position. A mixture of the good, the bad and the awful. Judge for yourself.

                                                                                                      Rs Crores


State sales taxes                                                                                33,970
Profits and taxes from liquor sales                                                      23,400
State's share of central taxes                                                             14,520
Property Taxes                                                                                    8,338
Others                                                                                               21,549

Total Revenues                                         1,01,777


Interest                                                                                              10,196
Freebies  (the awful kind like mixers, grinders)                                      8,350  
Pensions                                                                                            13,680
Unproductive expenditure                                                             32,226

Education                                                                                          16,293
Agriculture                                                                                           6,346
Health                                                                                                 5,365
Power                                                                                                 4,368
Urban Development                                                                            4,148
Other Revenue productive expenditure                                              10,108
Other Capital productive expenditure                                                 28,362
Productive expenditure                                                                 79,032

Grants to local bodies and Panchayats                                          9,233

Total Expenditure                                     1,20,491

Note : Classifications of" "unproductive" and "productive" are my own    

One thing immediately stands out from the revenues - the Tamil Nadu government is essentially a liquor company. It has commandeered a monopoly of the liquor distribution in the state. Liquor consumption is booming in Tamil Nadu, aggressively driven by TASMAC - so much so that the per capita liquor consumption in the state is the highest in the country. If you have seen a TASMAC outlet anywhere in the state, you would know it is one of the dingiest and most depressing of all places. Only the poor frequent TASMAC. If ever there was a case of the state robbing the poor ..........

The thing that stands out on the expenditure side is that pensions are a bigger problem than freebies. The freebie nonsense is a relatively small amount and can be turned off, for many of the freebies like mixers and grinders (the largest one is laptops)  are one time affairs. The real problem is pensions, to the 7 lakh retired employees of the state. It is a sobering thought that 1% of the population of the state (and relatively well to do at that) corners 14% of the state revenues. Wonderful.

The better side of the story is that a considerable portion of the expenditure actually goes to productive uses. The state has always been a leader in education. Its health sector is also one of the better managed ones in the country. Its roads are good. It has faced a chronic shortage of power and has stepped up investment in this sector by a huge amount. Irrespective of which political party is ruling, productive expenditure has always been high. Yes, a significant portion of this expenditure is siphoned away by the political operators - for this is one of the most corrupt states in the country. Yet, a fair amount does actually get spent. So the situation is not that bad.

There are no elections to the state due for a couple of years. When the state elections come, the chief issues , economically speaking,  for the state are

  • Is it ethically right for the state to remain financially afloat purely by getting the poor to be fully drunk.
  • What to do about pensions
  • How can we get a greater proportion of well meaning productive expenditure to be actually spent instead of being siphoned away

I am willing to bet not one of these will be debated election time.              
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