Real Advice Or Just Optics? Stalin Hopes Experts Solve TN’s Economic Problems

The DMK appears to have been sold on expert advice after the election expertise of Prashant Kishor guided the party to power in the recent Assembly elections.

The M.K. Stalin government has now announced that it would constitute an Economic Advisory Council (EAC) that would include such big names like Nobel Prize winner Esther Duflo, former RBI Governor Raghuram Rajan, former Chief Economic Advisor to the Centre Aravind Subramanian, Development Economist Jean Dreze, and former Union Finance Secretary S. Narayan.

“Based on the recommendation of the council, the government will revitalise the state’s economy and ensure that benefits of economic growth reach all segments of society,” state Governor Banwarilal Purohit said in his address to the state Legislative Assembly on Monday. The intent of the Stalin government cannot be faulted as the state’s finances have been in the doldrums for the past four years and the DMK has been red flagging it while in Opposition. Now that it has an opportunity it wants to seriously address its weak points taking the help of experts to bring back the state economy’s health to pink.

But the attempt also has all the appearance of optics and window dressing for two reasons. The DMK government discovered that it has bitten more than it can chew by its slew of election promises in its manifesto. For example, the ambitious assurance to trim the VAT on petrol and diesel and the Rs. 1,000/- monthly allowance to housewives appear unachievable in the near future.

The state Finance Minister PTR Thiagarajan let the cat out of the bag on Sunday when he ruled out reducing VAT on fuels blaming the Centre for the state’s present predicament. By increasing only the cess and surcharge on fuel and not excise, the BJP government has denied state governments their share whenever excise duty was hiked. “In the last year alone (2020-21), the Union government’s revenues from cess and surcharges on petrol and diesel have rocketed from ₹2.4 lakh crore to about ₹3.9 lakh crore, while the actual revenues shared with Tamil Nadu from the excise tax collected by the Union on these products have dropped from ₹1,163 crore to ₹837 crore,” he alleged.

“How can we run the government if we reduce VAT?” he asked and said that the details would be explained in a white paper to be presented ahead of the state budget in July. Now that the EAC is in place the government can say that it would wait for its recommendations to take corrective action and implement those two election promises that are expected to make a huge dent on the state’s finances.

Former Chief Minister Edappadi K. Palaniswami rightly pointed out that the DMK was not unaware of the state’s finances before it came up with its manifesto. “Even in the interim budget presented in February the state’s fiscal health had been explained in detail. So, no information was suppressed for the DMK government to be surprised. It is only trying to cover up its inability to fulfil its election promises,” he told reporters today.

Secondly any tough decision with financial implications, like hiking prices of liquor or registration fee, could be laid at the door of the EAC saying it was essential for the betterment of the state’s economy. Thus, the EAC could be yet another fig leaf quite similar to the committee headed by a former HC judge to examine the impact of NEET on students which fell short of the election promise of “scrapping NEET on coming to power.” Now the state Health Minister has urged students to be prepared for NEET this year while the Governor’s address promised a suitable law that would also get the President’s assent. A similar law passed by the earlier AIADMK government is still pending before the President for his assent.

The one positive spin off about the EAC is the willingness of the DMK government to take external help in running the state. “The state’s Finance Ministers were never known for their expertise in the field – they were either former Tamil teachers or lawyers. So, for the DMK to seek outside help from domain experts needs to be welcomed. Jayalalithaa had roped in former RBI Governor C. Rangarajan between 2011 and 2016 and sought to implement some of his recommendations,” pointed out S. Viswanathan, editor of Industrialist Economist. “True they may not be actually hands-on about Tamil Nadu’s problems or hail from the Dravidian stock but their experience should come in handy,” he added.