With grandiose poll promises like supply of rice at Rs 2 per kg, free colour television sets, free gas stoves, and two acres of land for the landless, will the DMK-led government be able to generate enough resources for developmental projects and manage the state finances prudently? The history shows the state's failure to generate surplus resources for major projects. | |
| The measures brought about by the AIADMK government did repair the damage caused by the poor financial management of the previous decade. |
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| Aided by a buoyant economy and more liberal aid from the central government, the state's finances have been in good shape over the last few years, according to reports. This also made it possible for the AIADMK government to restore many of the concessions it withdrew earlier and even afford to offer freebies matching DMK's poll promises. |
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| Though DMK president Karunanidhi assures that his government will not go back on his poll promises, the moot question is how the state can generate the resources to fulfil the promises as these measures would cost a couple of thousand crores. |
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| Stating that it would be feasible to offer rice at Rs 2 per kg if the state government found new resources or re-allocated its current resources, P Chidambaram, union finance minister, also cautioned that the outstanding debt of the states would increase if they ran fiscal deficits. "The states will have to find the resources to service the debt and need to earn revenue to service others," he pointed out. |
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| During the AIADMK regime (2001-06), under Medium Term Fiscal Plan (MTFP), the State was able to reduce the revenue deficit as a percentage of the total revenue receipts to 6.6 in 2003-2004, which was a major correction when compared to the level of 23.28 per cent in 2002-2003. |
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| The fiscal consolidation was sustained in 2004-2005 without imposing any new taxes and further bringing down the revenue deficit as a percentage of the total revenue receipts to 2.47 per cent in 2004-2005, thus achieving the objective of bringing down the ratio to a level below 5 per cent well before the target year 2007-2008. |
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| The total revenue expenditure for 2006-07 was projected at Rs.34,253.56 crore as against total revenue receipts of Rs 34,046.29 crore. The overall deficit at the end of the financial year 2006-07 has been estimated at Rs.5.57 crore. |
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| C Ponnaiyan, finance minister in the AIADMK government, in his 2006-07 budget speech mentioned that the state was well on track to eliminate the revenue deficit and reduce the fiscal deficit to a level below three per cent of the gross state domestic product by 2008-09. |
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| The state government framed a medium term fiscal plan and brought rigorous cost accounting systems along with the nationalisation of the liquor trade to bridge the fiscal gap. Another key reason for bringing the deficit in order was by not filling about 300,000 vacancies created by superannuation of employees, which led to containing the wage bill. About 90 per cent of state's revenue was used to pay salaries of state government employees, according to Ponnaiyan. |
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| However, allies of DMK have been seeking to lift the ban on new recruitments. With the DMK-led party coming to power, the ban may be lifted. |
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