Actual recommendation or simply optics? Stalin hopes consultants will resolve TN’s financial issues

DMK appears to have been sold on expert advice after Prashant Kishor’s election expertise brought the party to power in the recent parliamentary elections.

MK Stalin’s government has now announced that it will set up an Economic Advisory Council (EAC) that will include such big names as Nobel Prize winner Esther Duflo, former RBI Governor Raghuram Rajan, former Chief Economic Advisor of the Center Aravind Subramanian, development economist Jean Dreze and the former Union Finance Minister, S. Narayan.

“Based on the recommendation of the Council, the government will revitalize the state’s economy and ensure that the benefits of economic growth reach all segments of society,” said the state governor Banwarilal Purohit in his address to the state legislature on Monday. The intention of the Stalin government cannot be objected to, as the state finances have stalled in the last four years and the DMK warned them in the opposition. Now that she has the opportunity, she wants to seriously address her weaknesses and, with the help of experts, bring the health of the state economy back into shape.

But the attempt also has the appearance of optics and window dressing for two reasons. The DMK government has found out that it has bitten more than it can chew on its election promises in its manifesto. For example, the ambitious pledge to lower VAT on gasoline and diesel and the Rs. 1,000 / – monthly allowance for housewives seem unattainable in the near future.

State Finance Minister PTR Thiagarajan let the cat out of the bag on Sunday when he ruled out a cut in VAT on fuels and blamed the center for the state’s current situation. By increasing only the consumption tax and the fuel surcharge and not the consumption tax, the BJP government has denied state governments their share if the consumption tax was increased. “In the last year alone (2020-21) the revenue of the Union government from excise taxes and surcharges for gasoline and diesel rose from 2.4 lakh crore to around 3.9 lakh crore, while the actual revenue from the excise tax, which was generated by Tamil Nadu the Union levied on these products fell from 1,163 crore to 837 crore, ”he said.

“How can we run the government if we lower VAT?” He asked, saying the details would be set out in a white paper to be presented before the state budget in July. Now that the EAC is in office, the government can say it will await its recommendations in order to take corrective action and implement the two election pledges that are expected to weigh heavily on public finances.

Former Prime Minister Edappadi K. Palaniswami rightly pointed out that the state finances were not hidden from the DMK before it presented its manifesto. “The state’s fiscal health had already been explained in detail in the interim budget presented in February. So no information was suppressed in order to surprise the DMK government. She’s just trying to cover up her inability to deliver on her election promises, ”he told reporters today.

Second, any tough decision with financial implications, such as increasing liquor prices or registration fees, could be put on the doorstep of the EAC, saying it is essential to improving the state’s economy. Thus, the EAC could be just another fig leaf very similar to the committee chaired by a former HC judge to investigate the impact of NEET on students, which failed to deliver on the election promise to “abolish NEET upon takeover”. Now the country’s health minister has urged students to prepare for NEET this year, while the governor’s address promised an appropriate law that would also get the president’s approval. A similar law passed by the previous OIADMK government has yet to be approved by the president.

The only positive side effect of the EAC is the willingness of the DMK government to seek external help in running the state. “The state finance ministers were never known for their expertise – they were either former Tamil teachers or lawyers. Hence, the DMK must be welcomed to seek external help from domain experts. Jayalalithaa brought the former RBI governor C. Rangarajan on board between 2011 and 2016 and tried to implement some of his recommendations, ”said S. Viswanathan, editor of Industrialist Economist. “It is true that they may not have real hands-on experience with Tamil Nadu’s problems or come from the Dravidian tribe, but their experience should come in handy,” he added.

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