Focus of TN Budget will shift to investment from expenditure: Chakravarty

Congress MP Praveen Chakravarty says Tamil Nadu's first TVK budget will prioritise revenue reforms, fiscal discipline and investment, while calling for a rethink on jobs and welfare

Congress leader Praveen Chakravarty became a Rajya Sabha member from Tamil Nadu in June with the support of the party’s new ally, the Tamilaga Vettri Kazhagam. Chakravarty chairs two of the Congress’ departments, the Professionals’ Cong­ress and Data Analytics wings. He has been advising the TVK government in shaping its policies, including helping to set up the Revenue Augmentation Committee under economist Montek Singh Ahluwalia. In a conversation on the sidelines of Parliament’s Monsoon Session, he tells Archis Mohan in New Delhi that he expects the state Budget, the first of the new government and will be tabled on August 5, will change how the country has looked at Budget making in recent years.

 

The chief minister (C Vijay Joseph) turns to you for advice, especially on economic issues. What is your assessment of the state’s finances and the new government’s ability to deal with the challenges? 

No, no. The chief minister doesn’t turn to me often for advice. We (Congress) are an alliance partner, so to the extent we can help, we will. The state’s finances are not particularly healthy. Its debt levels have gone up nearly six times in the last 10 years. Its interest burden is one of the highest among the larger states. Committed expenditure is almost 65 per cent of the revenues received, which is very high. It is a precarious situation. The chief minister realises this. First, it’s an acknowledgement of the problem and that is important. Second, a committee has been formed under the chairmanship of Montek Singh Ahluwalia with a specific task and clear mandate: How do we increase the state’s own tax revenues from 5.5 per cent of gross state domestic product (GSDP) to about 8 per cent, which is what it was about 15 years ago. This involves looking at excise reforms and looking for new revenue opportunities, including property taxes. 

The committee will look only at the revenue side, and this is where I want to highlight how this is a shift. Most people, when they say the finances are bad, look at expenditure. What has gone unnoticed is revenue, and how it has gone down (outside of central devolution). 

What are the sectors that it would look at? 

I have analysed this. Liquor excise alone in my estimate is short by about ₹35,000 crore a year. In terms of its percentage share in the state’s GSDP, if you compare with Maharashtra or Karnataka, the amount Tamil Nadu should have got through liquor excise, which it was getting 10-15 years ago, is not commensurate with its level of economic activities, and it is because of a variety of reasons, including corruption. Second, it (the panel) will look at whether we can charge excise duties based on alcohol volumes, which is not the case today in Tamil Nadu. Then there is huge scope for reform in property tax and its collection. Third, there is the issue of better monetising state assets, state public-sector undertakings, land banks, and road assets. These are various avenues that the committee would look into. 

What can one expect from the first Budget of the new government? 

The Budget will set the direction of how this government is looking to shape the state’s economy. I believe it will shift the emphasis from expenditure to investment and revenue. 

The chief minister’s council of ministers is young — its average age being 44.6 years. 

The idealism of the young is an advantage. So far we have traditionally had “experienced ministers” more interested in doing politics and politicking than devoting themselves to new ideas, issues of governance and efficiency. I can tell you from personal experience that the industries minister (S Keerthana, who is 29 years old) is idealistic, and also keen to understand how the state can move up the value chain. A question she asked us after being sworn in was how we could move from making iPhone cases to producing some of the parts in the phone. I don’t see a so-called experienced politician or minister even thinking along these lines. You could always say the disadvantage is lack of experience, but that can be easily supplemented with not just the bureaucracy but outside experts as well. 

You were one of the few who predicted the TVK’s win in the Assembly polls because the youth had shifted their support to Vijay. Now, there have been youth protests across the country. Is there a broader trend of the youth demanding a change in the way politics and governance is pursued and practised? 

Absolutely. I think there is a common thread between what happened in Tamil Nadu and what we saw at Jantar Mantar. It is that the young generation is tired of establishment politics and the status quo. I saw this happening clearly in my surveys that I was doing in Tamil Nadu as well as talking to people. They are clear about what they don’t want but also understand that the new may or may not work, but they want to give it a chance. Tamil Nadu saw the rejection of establishment politics. 

What are your views on welfarism and on universal basic income since you piloted the Congress’ 2019 manifesto promise of Nyay or Nyuntam Aay Yojana? 

It is easy for us to dismiss all of this as welfarism but the question is if as a country we are not confident of creating jobs, it’s the responsibility of any elected government to ensure that people’s needs are taken care of. How do you do that? The growing welfarism is a direct consequence of the inability and the uncertainty around jobs, and the future of jobs and incomes. On Nyay, what many people miss is that even in that manifesto we had said that we would also ensure that the Budget expenditure on it did not expand. We said we would have to re-architect the expenditure side and rationalise a lot of expenditure to move more towards cash transfers. 

You kind of suggested that all subsidies could get subsumed… 

Correct. To the extent we could in the manifesto, we did. I think a lot of people focused on expenditure and forgot about the part on rationalisation. I have also been a strong proponent of raising caution and alarm about the deteriorating state finances in this country. We cannot continue in the way states keep borrowing. So, that is why we need completely new expenditure architecture.