Tamil Nadu, the ultimate freebie State

Though Tamil Nadu is widely regarded as relatively well-governed, the State spends an inordinate amount of money on sops. Given the State’s finances, the question being asked is whether governments could continue with the policy of giveaways.

March 30, 2015 02:49 am | Updated November 27, 2021 06:56 pm IST - CHENNAI

File photo of government officials unloading the first consignment of wet grinders for free distribution in Udhagamandalam. Photo: M. Sathyamoorthy

File photo of government officials unloading the first consignment of wet grinders for free distribution in Udhagamandalam. Photo: M. Sathyamoorthy

Over the past decade, successive governments in the State have spent nearly $2 billion (Rs.11,561 crore) on just three freebie schemes – colour television sets, laptops and household appliances. These sops might have been acceptable when the State had excess money to spend. But with the government’s own recent budget projections indicating weak financial health, questions are beginning to be raised, such as whether the money spent on freebies over the last 9 years could have used for building over 25,000 schools or 11,000 primary health centres.

“Tamil Nadu doesn’t have leeway left for any more giveaways,” says S. Chandrasekhar of the Indira Gandhi Institute of Development Research.

“The difference between the rate of growth of the State’s economy and the rate of growth of public debt has pretty much narrowed to zero. At some point, the freebies have to stop. The government needs to have an extinguishing period in mind,” he says.

Since excess resources have been diverted to fund freebies over the past decade, the State’s reasonably good public healthcare system is not getting additional funds, says Mr.Chandrasekhar. At a time when long-term investments in public health and education are required to turn the economy around, “precious little” is being left for those sectors, he adds.

As a percentage of GDP, Tamil Nadu’s spending on both healthcare and education in the last few years has been below the average of the 17 large States in the country, according to an RBI report on State finances.

“This notion that most Indian States are socialist and welfarist is a fallacy,” says Mr.Chandrasekhar. “We really don’t spend that much on the poor. Freebies are nothing more than a symbolic exercise,” he says.

Others, however, point out that while freebies remain an issue, there are more pressing concerns for the State. The State’s expenses on personnel and salaries have gone up tremendously, says R.Srinivisan, a public finance expert and professor at Madras University.

Between 2005 and 2013, Tamil Nadu’s expense on salaries quadrupled, from around Rs.8,000 crore to Rs.34,000 crore. “There is a tremendous amount of inefficiency in our public expenditure. Nobody is looking into that,” says Mr.Srinivisan.

“Unlike the Union government, the State government has never released figures on the amount of revenue forgone as tax rebates and concessions to industry and businesses. Forgone revenues might turn out to be the real culprit,” he adds.

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