Tamil Nadu Finance Minister Palanivel Thiagarajan was taking part in a conversation with Montek Singh Ahluwalia, former chairman of the Planning Commission at a session moderated by Prabhu Chawla at the 10th ThinkEdu Conclave on Wednesday. He said “We are not expecting Delhi to be our saviour. What we want is fairness, predictability and a good partnership that allows for independent decision-making”.
Discussing the disparity in the devolution of funds between well-developed states and other backward states, he said in India, the transfer of wealth from the better states to poorer states has not helped to close the gap in inequality yet has rather broadened it. “Successive finance commissions have reduced funds to states like Tamil Nadu. From China to the US and Europe, with such transfer mechanisms, the gaps have narrowed or are stable. When it keeps widening at an accelerated rate, it raises questions about where the resources are invested and what is being done wrong in certain states,” he added.
He added “This system has been an utter failure. The government should incentivise things like women empowerment and education instead, which would drive the growth and create harmonious societies”. He proceeded to say that the Tamil Nadu government doesn’t consider providing laptops, uniforms, free food to students as freebies, rather thinks about them as an investment on human resources. He also questioned how the Central Government can presume that they can bring one homogenous programme from Delhi and impose it on 1.4 billion people.
When questioned why the state is lagging behind in the ease of doing business, Thiagarajan acknowledged that improvement in areas is required and red tapism should be done away with. “After the DMK Government took over, we have set up a task force for this purpose which will not only concentrate on multinational companies, but also MSMEs,” he said.
When asked why the Tamil Nadu economy is in line with other states, Montek Singh Ahluwalia said that an industrialised, urbanised and globalised state like Tamil Nadu can lead the country. He advocated that banking should be moved out of the public sector, he said that we are the only country in the world that has 70 percent of its banking in the public sector. “The public sector does not give managers the trust and flexibility to handle risky decisions,” he added.
“Get rid of the idea that the public sector must occupy the commanding heights of the economy. This has now changed. Next, growth in a modern economy is going to be led by the private sector so you need to provide an environment where they can flourish,” said Ahluwalia. He added that to prevent the private sector from overwhelming the system with cronyism, the government should keep the economy open so that the private sector competes globally. “We saw a clear signal in 1991 that the Indian industry, given the right environment, can compete. However, in the last three or four years, we have seen an increase in customs duties, a reversal of the 30-year trend, that may pose a challenge for private industries to compete” he said.