Economy sluggish, no double-digit growth for TN this year: Experts
Tamil Nadu’s economy is yet to gather pace even though the second quarter of the current fiscal is approaching closure. This despite the fact that many sectors, hit by the COVID-19 pandemic, have resumed operations and are striving to get back to normal.
Even though all sections of economy except religious places and offline classes for primary and middle-level schools have been reopened now, officials are not confident of seeing economic growth in double digits in the current year too.
“The economic growth is slowly picking up as all sectors are reopened. But it will take time before the growth picks up speed. We are not in any position to say whether this year’s growth will be in two digits or not. We are keeping our fingers crossed,” said a senior official.
The revised budget also mentioned that the economic growth will not be good this year.
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Tamil Nadu’s Gross State Domestic Product (GSDP) growth has been projected at 2.02 per cent in 2020-2021 while the national GDP is -7 per cent. Tamil Nadu’s growth has been enabled by the diversification of the economy and sustainable policy initiatives of the government.
“We expect better growth in the ensuing years compared to the current year projections. The GSDP growth of Tamil Nadu is estimated to be 11.5 per cent in 2022-23 and 12 per cent in 2023-24 as per 15th Finance Commission,” said the official.
The average growth rate of Tamil Nadu between 2005 and 2012 was 10.3 per cent and it had the second highest growth rate recorded among all states during that period.
Despite having the largest number of industrial enterprises, Tamil Nadu has the third highest value addition among states at 10 per cent of aggregate industrial value addition for all states, preceded by Maharashtra at 15 per cent, which has the highest value addition among all states, and Gujarat at 12 per cent.
Post-liberalisation, the share of eight states in the industrial value addition of all states increased from 56 in 1993-1994 to 67 per cent in 2019-2020. Maharashtra retains its industrial dominance, but Gujarat has used the trend of industrial concentration at the top to shoulder past Tamil Nadu — an opportunity lost.
Experts say that the fiscal management in Tamil Nadu suffered between 2012 and 2019.
“Tamil Nadu’s fiscal deficit (FD) in 2019-2020 at 3.3 per cent of GSDP is comparable to Kerala, another state known for welfare administration, and lower than Andhra Pradesh at 4.6 per cent. But compared to Karnataka’s FD of 2.5 per cent, Haryana’s 1.6 per cent, or Gujarat at 1.8 per cent, Tamil Nadu’s FD is far away,” said an economist.
Tamil Nadu’s liabilities are at a high of 25 per cent of GSDP versus 17 per cent in Maharashtra, 19 per cent in Karnataka, and 20 per cent in Gujarat.
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“High liabilities reduce fiscal resilience in downturns. They also reduce state capacity to continue the welfare schemes and public services which define the ethos of Tamil Nadu,” said the economist.
The question behind divergent growth trajectories is, can Tamil Nadu become more resilient to slowdowns? “There are two options: diversification away from traditional, labour intensive exports and enhanced diversification from industry and agriculture into the services economy. Tamil Nadu lags in both areas,” said the expert.