Saturday, February 12, 2011

Tamil Nadu Debt - Irresponsible answers

Tamil Nadu debt crossed one Lakh Core and it was reported by media. I blogged about it on 3 Feb 2011. As expected it was raised in Tamil Nadu Assembly opposition.

The  fact Tamil Nadu debt was doubled in last five years from about 50, 000 crores to one Lakh Crore. We need to understand 100% increase of 10,000 Crore is not same as 50,000 Crore. This is serious problem and we expected some responsible answers and action plan. However, the answers from the Ministers were irresponsible.

The Finance Minister told the Assembly that there was nothing wrong in going for loans to implement projects and welfare measures. In fact he was proud of what they have achieved. It was disapponting to hear this answer. He was also attributed the increased debt to global slow down. As usual they compare with other states like West Bengal, Maharashtra.

The Tamil Nadu Law Minister Durai Murugan joined the discussion saying no one will loan the money if it cannot be repayed. In my view, The question is not just on repayment. How the revenue is spent keeping the long term grwoth in mind.

The Deputy Chief Minister argued that even developed countries like USA borrows money so nothing wrong in borrowing money.

The reality is States debt is over 20% of GDP which is close the maximum allowed by Central Government which is 25%.  Any downward trend in state economy or additional borrowing will break the limit easily. At the current debt level it works out Rs15,000 per individual.

As my mentioned in the previous blog, the Government revenue is spent on welfare and other fixed costs such as salaries. The borrow money for all the development projects. This limits the number of projects and critical projects are moving slowly.  This is not a healthy trend. General practice is to make some investments from revenue and borrow the money for rest. It is also important to make sure the projects pays for itself from its revenue. Government may able to subsidize portion of the regular expense based on the project.  This Government wants to make money for their family and policies are framed around it. It is unfortunate.

The Welfare projects implemented by this Government are short sighted and questionable which I am planning to cover in coming week.

1 comment:

  1. It only depends on the level of commitment a minister has towards development. But, isnt TN govt known to be corrupt as much as other govts are?

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