The Hindu : Tamil Nadu News : Tamil Nadu claims top slot in tax effort

Online edition of India's National Newspaper
Friday, Mar 04, 2005

Tamil Nadu

Tamil Nadu

Tamil Nadu claims top slot in tax effort

By V. Jayanth

CHENNAI, MARCH 3. C ompared to 2002-03, there will be a 290 per cent increase in the capital outlay for 2005-06, taking the total capital expenditure to a high of Rs. 4,714.28 crores.

The capital outlay climbed to Rs. 2,172.33 crores in 2003-04 and Rs. 3,607 crores in 2004-05 (revised estimates). Capital expenditure, which was just 1.05 per cent of the Gross State Domestic Product (GSDP) in 2002-03, has been projected at 2.14 per cent for the coming year. Such a step-up in outlay has been possible due to the fiscal correction over the past four years and the sustained buoyancy in revenue in the past two years.

Tamil Nadu has claimed to have maintained the "numero uno position" in tax effort. The ratio of the State's own tax revenue to the GSDP, which was 9.86 in the revised estimates for 2004-05, "is among the highest in the country."

The buoyancy in revenue collections last year not only enabled the State to "maintain" this status but also helped the Government enhance its spending by at least Rs. 600 crores on a range of welfare and rollback measures through the year.

Reforms, targets

Virtually forced into the fiscal reforms process by a huge financial crisis in 2001, the Tamil Nadu Government embarked on tax reforms and is well ahead on the road to achieving the fiscal targets set under the Fiscal Responsibility Act. Chief Minister Jayalalithaa took this unpopular road to reforms but the reverses in the 2004 parliamentary elections created a roadblock.

Under pressure from the ruling All-India Anna Dravida Munnetra Kazhagam (AIADMK) functionaries and Ministers, who blamed the debacle on the reforms, Ms. Jayalalithaa rolled back some of the bold measures she had initiated. The buoyancy in the tax collections this year has no doubt helped her Government compensate for the spending on the rollback.

As such, the rate of growth of revenue expenditure has been brought down to 10.16 per cent in the budget estimates for 2005-06 from a high of 19.16 per cent in 2002-03.

This was possible, according to Finance Minister C. Ponnaiyan, with some "restraint" on overall salary and pension-related expenditure. This head of expenditure reached a climax of 102.85 per cent of the State's own tax revenues in 1999-2000, before sliding back to 93.18 per cent in 2000-01 and 88.70 the following year. It has now stabilised at about 70 per cent, thanks to a slew of measures — a freeze on employment, cutting down of perks and a substantial increase in revenue.

Simultaneously, the incidence of salaries and pensions as a percentage of the total revenue receipts declined from 68.78 per cent in 1999-2000 to about 46 in the revised estimates for 2004-05.

Following these positive signals from the fiscal report for the year, the very first year of course correction and the Medium-Term Fiscal Plan have been "heartening" to the State Government and its Finance Ministry. This correction in the revenue account has provided the "space" to go in for a record plan outlay of Rs. 9,100 crores in the coming year.

With this annual plan and the rise in capital outlay, the State has provided for enhanced investments in social sectors such as education, health and nutrition as also in key infrastructure areas including power and roads.

Printer friendly page
Send this article to Friends by E-Mail

Tamil Nadu