Global Economy

Tamil Nadu needs to increase Tax-GSDP ratio, suggests state's economic revival committee

A committee headed by former RBI governor C Rangarajan, set up by the Tamil Nadu government to identify measures to revive the state’s economy once the Covid-19 crisis abates, has suggested “appropriate rate changes to taxes” to raise the tax-GSDP ratio.

“In the medium term, the Tax-GSDP (Gross State Domestic Product) ratio should be increased through appropriate rate changes to taxes which have not been revised for a while and other measures,” the panel said.

The high-level committee also suggested immediate and urgent financial restructuring of electricity transmission and distribution utilities to improve state finances.

It pitched for development of integrated townships with social infrastructure facilities to attract investments.

Developing such townships in the ‘growth centres’ would provide a big advantage to the state in attracting investments, the panel suggested.

It also recommended setting up a short-term programme for providing alternative employment to the urban poor, preferably in-situ jobs, to provide minimum 75-100 man-days of work per year to the beneficiaries. “Special emphasis will be on construction of community assets in low-income neighbourhoods with strong involvement and participation of local communities,” it noted.

The panel proposed that the state incur an additional capital expenditure of Rs 10,000 crore.

It advised the state against cutting expenditure further from present levels of about 0.7% of GSDP, and suggested that a state-level credit guarantee scheme and an MSME fund could be established to take advantage of the central government’s MSME ‘fund of funds’ to increase credit flows to micro, small and medium enterprises.

“Government of Tamil Nadu can look into tolling the four- and six-lane roads developed by it and securitize those tolls to generate additional revenues,” it further suggested.


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