Tamil Nadu and Gujarat, whose models of development triggered a lively debate in the Lok Sabha election campaign, have some accomplishments in public finances, even as the former has better credentials in social and educational indicators of development.
A perusal of the report of the Reserve Bank of India, ‘State Finances: A Study of Budgets of 2013-14,’ published early this year, reveals that in the debt-Gross State Domestic Product (GSDP) ratio and the interest payments-revenue receipts ratio for the fiscal 2011-2012, Tamil Nadu was better placed than Gujarat.
Also, be it the State’s Own Revenue (tax and non-tax) or in respect of select indicators like the development expenditure-GSDP ratio or the social sector expenditure-GSDP ratio, Tamil Nadu’s performance surpassed Gujarat’s.
The RBI report, an annual publication, presents an exhaustive account of the fiscal position of all State governments.
However, the story on public finances is not one-sided, and there are areas wherein Gujarat has scored over Tamil Nadu. For example, the former had a higher revenue surplus for 2011-2012. Compared with Tamil Nadu’s revenue surplus of around Rs. 13.6 billion, Gujarat registered Rs. 32 billion. In respect of the fiscal deficit-GSDP ratio, Gujarat’s score was 1.8 per cent against Tamil Nadu’s 2.6 per cent. As for the profit/loss of public sector undertakings, the accumulated losses of the Tamil Nadu PSUs stood at Rs. 596 billion, whereas Gujarat’s undertakings (many of which are in the sector of energy and petroleum) recorded Rs. 16.9 billion in profits.
On the relative positive features of Tamil Nadu, the value of the State’s Own Revenue was Rs. 652 billion, while it was Rs. 495 billion for Gujarat. Tamil Nadu overtook Gujarat even in the parameter of the SOR as a ratio to the GSDP. Tamil Nadu’s 11.2 per cent was about three percentage points ahead of Gujarat’s (8.09 per cent). (The total value of the GSDP of the two States is sourced from the budgetary documents of the States).
With regard to the relationship between interest payments and revenue receipts, Tamil Nadu’s ratio (10.4 per cent) was lower than that of Gujarat (17.4 per cent). This means that the annual interest outgo on loans is lesser for Tamil Nadu than for Gujarat for 2011-12. Yet, the western State’s higher revenue surplus could be attributed to its less expenditure on wages and salaries and in the social sector, in both of which Tamil Nadu spent cumulatively about Rs. 210 billion more than Gujarat’s Rs.478 billion. As for outstanding liabilities, Tamil Nadu’s tally was lower than Gujarat’s by Rs. 200 billion. In terms of percentage of the GSDP, the liabilities of the southern State accounted for 19.6 per cent, while Gujarat’s debt amounted to 24.7 per cent of its GSDP.