Union Budget: No big bang for South, Tamil Nadu

Chennai: Titling his road-map, ‘Transform India’, as Finance Minister Arun Jaitley presented his third consecutive Union Budget for 2016-17, in the Lok Sabha on Monday, the moving thought-currents beneath have unmistakably focused on macro-economic stability, fiscal prudence without cutting down on social sector/employment outlays and further pointers to structural reforms in the economy.

However, unwittingly, the ‘Transform India’ thrust, barring a few references to the concerns of the North-East and a few other sector-specific projects in some States, Mr Jaitley’s budget speech per se (the details of the fine-print will have to wait for another day), appears to have lumped all States together.

So much so, for ordinary citizens, as purveyors of the budgetary information, used to hearing goodies or some big-bang announcements specific to States apart from the direct tax proposals and savings sops that directly affect them year-to-year, first impressions are bound to be disappointing from the States’ point of view.

This is particularly so for people in the Southern states, and Tamil Nadu in particular, where the ruling BJP is vying to be a ‘player of substance’ in the coming State Assembly elections in Tamil Nadu.

In the FM’s speech, the States-specific references are more in terms of macro-indicators. The biggest of them being “a sum of Rs 2.87 lakh crore to be given as ‘grant-in-aid’ to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission.” This, according to Mr. Jaitley, is a “quantum jump” of 228 per cent compared to the previous five-year period and the funds now allocated would “translate to an average assistance of over Rs.80 lakh per gram panchayat and over Rs.21 crore per urban local body.”

The Ministry of Panchayati Raj “will work with the States and evolve guidelines to
actualize this,” the FM added.  Clearly, the approach to Centre-State assistance is changing, as it flags a way of “transforming villages and small towns”, directly from New Delhi, rather than through State capitals.

Another significant announcement in Mr Jaitley’s budget is that the ‘plan/non-plan classification’ of government expenditure will be abolished from the fiscal year 2017-18, when the next five-year plan will come into operation. “The Finance Ministry will closely work with the State Finance Departments to align Central and State Budgets in this matter,” he said. This is yet another issue that could ruffle the feathers of States, even if it implies a macro-level rationalization in allocation of funds.

Despite the massive capital spending proposed for road and rail infrastructure projects across the country to the extent of Rs 2,18,000 crores and consolidated sum announced for Metro rail projects, there is no specific project in
Tamil Nadu or the Southern states that has been on the tray, like the mention of Tuticorin port expansion in his first budget.

At the level of specific tax proposals, the FM proposing a change in the excise duty on branded readymade garments “and made up of articles of textiles with a retail sale price of '1,000 and above” could have important implications for the hosiery hub of Tirupur, which is already facing stiff competition from China and Bangladesh.

It appears that individual states can now only hope for more funds devolved under the rationalised Centrally-sponsored schemes, apart from the BJP government’s flagship projects like ‘Swachh Bharat’, ‘Digital India’ and ‘Smart Cities Programme’.

Is it the beginning of a new grammar in Centre-State fiscal relations? As experts are likely to debate this crucial underpinning in Mr Jaitley’s otherwise, balanced and well-crafted budget, the FM’s speech has broadly shown the contours of such a change, a new dialectic of centralisation and de-centralisation of fiscal relations.