Till a few days before Jayalalithaa was hospitalised in September 2016, Tamil Nadu had opposed the Goods and Services Tax, because the chief minister believed that the new tax regime would hurt the state's manufacturing sector. Her party, the AIADMK, even said that its 50 MPs would not vote for GST.
It was not the first time that Jayalalithaa had taken a stand against the Centre. She had opposed certain recommendations of the 14th Finance Commission that would have led to the state incurring a huge loss. She was also against the Ujwal DISCOM Assurance Yojana (UDAY) initiated by the Union government, because she believed that it would hinder the state's financial autonomy. She refused to implement the National Food Security Act because it would have affected the public distribution system in the state.
In May 2016, when President Pranab Mukherjee approved the ordinance on National Eligibility-cum-Entrance Test (NEET), Jayalalithaa wrote to Prime Minister Narendra Modi to let Tamil Nadu continue its existing system of admission.
However, nine months after her death, AIADMK MPs voted in favour of GST on June 30. In his maiden budget speech, Finance Minister D. Jayakumar chose to remain quiet on the recommendations of 14th Finance Commission. Electricity Minister P. Thangamani, on the other hand, had an hour-long meeting with Union Minister of State for Power Piyush Goyal before joining the UDAY scheme. The state also adopted the National Food Security Act and NEET.
Tamil Nadu's tax revenue is bound to be hit because of the implementation of the commission's recommendations and GST. Industrial investment is on the decline. The state has earned the tag of being one of the most corrupt in the country. As per a survey released by the National Council for Applied Economic Research in June 2016, Tamil Nadu was second on the list of the most corrupt states. Eight bureaucrats posted in the state have expressed their interest in getting a deputation to the Centre or any other state. The state may also lose its welfare tag as the Amma brand is in decline.
The state government's handling of the state school syllabus revision throws more light into its depleting state of affairs. State educational secretary T. Udhayachandran had begun initiating lots of efforts on his own in the wake of NEET exams. Though these reforms were supported and welcomed by school education minister K.A. Sengottaiyan, Udhaychandran refused to cooperate with the minister for indiscriminate transfer of teachers in which huge money was reportedly involved. This started the face-off between the minister and secretary. Udhaychandran refused to budge.
A PIL was filed in the Madras HC praying not to change the current composition of the committee that was working on revision of the state board syllabus. Udhaychandran was part of the committee. The court ordered that no member of the committee should be transferred till the syllabus is revised.
However, to overcome this order, the school education minister appointed IAS officer Pradeep Yadav as the principal secretary, over and above Udhayachandran, to effectively curtail the power of Udhayachandran. “This makes the corruption obvious in the government. In all departments, there is literal loot. A system was maintained in AIADMK when Jayalalithaa was alive. She was like a ring master and ran a tight shift. But now ministers are answerable to no one in the government and the CM doesn’t have control over a single minister,” said writer A. Shankar, who blogs about the inside fight in the AIADMK. The best example is the chief minister’s inefficieny in removing health minister C. Vijayabhaskar from the portfolio, despite I-T raids and his properties being attached by the central agency. “This shows chief minister K. Palanisamy is under the mercy of ministers,” says Shankar.
“It is total chaos and confusion, and lack of governance and administration at all levels,” says M.G. Devasahayam, a retired bureaucrat. “The government has not only come to a standstill, but it is also in reverse gear. The bureaucracy is in a state of disarray. Usually, when there is political instability, the officers run the state, as there is a system in place. But it is so ruined that an accused in the gutka scam has become the state DGP, despite him being under the income tax scanner.”
According to the Reserve Bank of India's Handbook of Statistics on Indian States, Tamil Nadu's fiscal deficit tripled in the past three years. Of Rs 2.42 lakh-crore worth of memorandums of understanding signed by Jayalalithaa during the Global Investors Meet in 2015, only Rs 87,000 crore has come in so far. The state’s own tax revenue (SOTR) is just around Rs 1 lakh-crore. The gross state domestic product growth rate stands at 4.58 per cent, with a fiscal deficit of Rs 61,341 crore in 2016-17. The fiscal deficit to GSDP ratio has already breached the three per cent mark set by the Fiscal Responsibility and Budget Management Act.
“The state is a long way from achieving revenue surplus again. Last time it achieved a surplus was in 2012-13. The fiscal deficit to GSDP ratio is already high and it will go up if the state implements the Seventh Pay Commission recommendations,” says economist Venkatesh B. Athreya.
Industries Minister M.C. Sampath, however, said the economic scene in Tamil Nadu was buoyant and the foreign direct investment was almost Rs 1.26 lakh-crore in 2016.
The AIADMK government has added considerably to the state's debt burden. In the past five years, debt has gone up from Rs 1.05 lakh-crore to Rs 2.18 lakh-crore. As a result, the Chennai Corporation's plans to launch more initiatives under the umbrella Amma brand has been put on hold. “There are no funds to implement some of the schemes,” says former Chennai mayor Saidai S. Duraisamy.
Amma canteens, which used to serve 4.5 lakh idlis per day now make only 3.01 lakh idlis. Apart from idlis, these canteens dish out 1.04 lakh chappatis and 88,000 plates of rice, which is 60 per cent less from what it sold last year. Amma drinking water and Amma pharmacy, too, have been hit. The Chennai Corporation runs just 49 drinking water facilities while the original plan was to run 100. “These welfare schemes support the needy,” says Duraisamy. “When there is cash crunch, how can you expect the government to fund major projects?”
The corporation is considering shutting down 200 of 407 Amma canteens in the city. “We are not able to divert funds for other infrastructure projects. Payments worth Rs 700 crore are pending towards the infrastructure projects,” says a senior official at the corporation. Chief Minister Edappadi K. Palanisamy, however, ruled out closing the canteens. The government, he said, was not worried about profit or loss, and would continue to fund the canteens.
The cost of doing business in Tamil Nadu is going up each day, say industrialists. Also, the government has been sitting over clearances for several projects. “There is definitely a change in the investment perspective of Tamil Nadu after Jayalalithaa's death,” says M. Rafeeque Ahmed, former chairman of the Federation of Indian Chambers of Commerce and Industry. “It used to be an investor-friendly state. But now there is no firm government policy.”
The latest 'ease of business' ranking by the Union government's department of industrial policy and promotion puts Tamil Nadu in the 18th place, six places down from last year. A highly industrialised state, Tamil Nadu received $17 billion in foreign direct investment from April 2000 to March 2015, and contributes more than 10 per cent of the national output in paper, machinery, electronics, textiles, auto and auto components. But, inefficiency and corruption have been eating away its competitive advantage.
Recently, actor Kamal Hassan, who is perceived to be warming up to the opposition, DMK, attacked the government for not trying to curb rampant corruption in various departments. “I have been saying for more than a year and a half that there is an urgent need to overhaul the system,” he said during a recent media interaction. “There is corruption everywhere. Tamil Nadu has overtaken Bihar to become the most corrupt state in India.”
