 and fiscal rectitude and all the neoliberal Mambo Jambo that we all have around us, really not done anything dramatic in the budget, concept that serves the interests of finance capital. State government is a very limited power under the constitution. Hello and welcome to NewsClick. The present DMK government has filed its first full budget for the financial year 2022-23. There have been many responses to the budget, both positives and critical negative responses. But to have an expert view on the matter, we have with us Professor Venkatesh Atreya, a former professor of the Bharatidhasan University and an adjunct faculty at the Asian College of Journalism. Hello sir, thanks a lot for joining us. So can you start by giving us a context to this budget in what international and national context is it being presented? We all know we have a very uncertain and critical international context on the Russia-Ukraine war is the most recent add-on complication, big one. But we had rising prices even before that and it has been a very very slow, very uncertain recovery, not just through the pandemic, but even from more or less from the 2008 industrial financial crisis for almost 15 years, trend rate of growth in the advanced capital has continuously been much less than the trend earlier. So we are generally in an environment, global environment of very slow growth, accompanied by now rising inflation. So this means that your prospects of let us say increasing the growth rate through expansion of exports is rather dim. Likewise, with the disruption caused by the war, the consequent impact on supply lines and chains as well as the rising prices of fuel, they are all going to impact much strongly on the recovery prospects of all economies. India certainly is going to be pretty majorly impacted. This is the overall situation. So it is not a, I do not envy PT, finding out PT Thiyagarajan because he is having to present the budget in a difficult environment. And to make that worse, we had a national situation where union government has been quite disastrous in its handling of the COVID pandemic and its policies, I would say right from the absolutely unwanted, unrequired demonetization completely mad to put it politely and then followed by the chaos caused by a very ham-handed GST, all of which brought you to a very slow growth of the economy by 2019, quite much worse by the pandemic and the way the union government has handled the pandemic, both with the arbitrary country-wide lockdowns and later on with flip-flops for vaccination. Essentially, it has been a disaster. The union budget, which is now in tatters basically, numbers are not credible to begin with, that is not going to help Thiyagarajan much. And because the DMK is in an adversarial relationship to BJP, that is not going to help much either. It is a very great challenge that Thiyagarajan faces. So, the budget which is presented has reduced the fiscal deficit of the state and the Finance Minister has been very proud of this. After eight years, it has been reduced. So, is it a good thing? Shouldn't the government generate more funds and spend on the people? How do you see this? Thiyagarajan had emphatically expressed his commitment to fiscal reform and fiscal rectitude and all the neoliberal Mambojambu that we all have around us. So, that was a matter of concern. Although in the first budget, to be fair to give him credit, he did lower the state excess duty on petrol and diesel, bring them down by 3 rupees, which is a big gain for the people at that time. This year again, his budget is reiterated his commitment to implementing the Tamil Nadu Fiscal Responsibility Act and bringing down the fiscal deficit below even the 15th Finance Commission norms. Likewise, bringing down revenue deficit. He has really not done anything dramatic in the budget. As far as allocations go, pretty much last year's allocations give it 2 percent, 3 percent, 5 percent this way, that. So, it is like a bit here, a bit there. There have been increases in outlays for education, school education. There has been practically no increase for higher education. There has been a reduction for health and family welfare. There has been a significant increase for rural development in Panchayati Raj. So, there is some positive there. But overall, he has been so, and you know, if you must also thank the stars that this year, the actual revenue deficit, the revised estimate, turned out to be a bit lower than the budgeted estimate by about, by 5000 crores. Mainly because central revenues to the state were higher than expected in the budget, partly because of the whole GST picking up and all that. But that is a one-time thing. And the GST compensation stops in the middle of this year, June 2022. That is a matter of concern for the state also. And the Chief Minister has requested for a two-year extension. Finance Minister has also talked about it in the budget. But at the end of it, what strikes you is that he wants to reduce the revenue deficit very sharply. And then the fiscal deficit, to something like 3.9 percent is what he says in relation to 8.3, but in relation to a target of 4.1. Yeah, it is a bit, the finance commission allows you a higher fiscal deficit with this year. But let me stop for a minute to explain to the lay viewer what is this fiscal deficit all about. See, the fiscal deficit is a very simple and very ideological concern. Very ideological. And I mean what I say. It takes the total expenditure of government, current expenditure plus expenditure that goes to form assets, capital expenditure. And then it reckons as legitimate. Only those receipts do not come from borrowing. In other words, all non-debt receipts is the lingo that they use, which means basically penalizes government borrowing. It has a notion that governments have no business to be in business. If at all they are doing some spending, they must do it by selling assets, not by, you know, they consider government borrowing practically as not legitimate as a receipt. Ironic because you live in an economy where the private sector borrows heavily from publicly owned banks and no accountability. Of course, you also shower them with debt relief. But here is an elected government borrowing and that in the fiscal concept is considered not legitimate. It is a very neoliberal, no, no, it is a very neoliberal concept. It is a concept that serves the interests of finance capital. And so we do not need to buy that as a as a holy grail at all. Now, with that definition, the only way governments can raise expenditures to meet people's needs would be either through taxation which is frowned upon because then that in turn in the neoliberal regime means is in disincentive to investment by the rich, by the private sector. So if you're not allowed to, if you're discouraged from raising taxes or even collecting existing taxes effectively by better tax collection mechanisms, then you're left only with selling public data assets to raise resources. Because after all the government gets resources in the following ways. One, taxation, two, surpluses of government-owned enterprises and three, charges levied for services the government provides to the population. That has been raised repeatedly of course, but it's difficult to do so year after year and in an environment like Tamil Nadu, there's a fair amount of resistance to those kinds of increases. The state governments have been denuded of taxation powers post GST Act. So now they have absolutely no powers to decide tax rates on commodities except for four items, tobacco, alcohol, petrol and diesel. These are the only items outside the GST and the GST council is heavily loaded with the union government forces. So state government which are very large in fact, they rule over populations above 80, 70 million, Tamil Nadu 80 million plus as large as the federal republic of Germany or the UK or France and yet they're treated like petty municipalities with no taxation powers. The old slogan used to be no taxation without representation in the old struggle for democracy in the U.S. Now there is representation but no taxation. So it's a very ironic situation, man. This is something that has to be fought. You almost fight for the you know, essentially the change in the whole regime, taxation regime, GST being questioned fundamentally, that's not going to happen tomorrow. So GST has been a big kind of impact on the states and their ability to raise revenues. The other thing is basically the divisible pool which the government of India when they collect taxes has to share with the states under the finance commission awards. Now in that also, what the government of India has been doing and this is something that Dhaigarajan pointed out even last year in his white paper, it's been increasing the share of successes and surcharges from about 10 percent of central tax revenue to about 20 percent which means these are not shareable with the states. They don't go into the divisible pool. So the states in general are hemmed in by the union government's very arbitrary measures in respect to taxation and even in when it comes to raising petrol and diesel taxes which the government of India has been doing, they have taken recourse to this gimmick of doing it through raising successes and surcharges rather than basic excise duty. So that's one thing. So there is a real financial constraint that the state government responds to the state government. It's not really doing anything different to generate funds as the union government. No, no, that is a problem. You see state governments, this is, people must understand that the state government is a very limited power under the constitution. The more elastic sources of revenue like income tax, you see when an economy expands, income taxes will rise automatically. Those elastic sources of taxation are with the government of India and in the rates of taxation on both corporate income and personal income, which is basically decidable government of India, the concessions offered by the union government over the last several years to the tax, to the big rich, well-to-do taxpayers, they have heard the state governments because the shareable revenue goes down. And you know, there is very little default state governments on trying to raise taxes from one to two sources. I mean, the whole state-owned tax revenue is very, it's very difficult to raise it significantly. What the agrarian has talked about and he did that before, in an interview before the budget and this is about improving tax collection mechanisms. And so he hopes to get much more this year. Those are very optimistic estimates. He hopes to get more through collection of commercial taxes. Alcohol, the excessive alcohol is often not paid properly. So he's trying to plug whole loopholes there. And so he hopes to, he in fact, in that interview, he says that if we had better tax collection mechanisms, we could be actually recovering up to 2 to 3 percent of GSDP across the state government product. The other thing, of course, is non-tax revenues. For example, the state government has resources that leases out and so on. So there are some, there is some provision, the some scope for state governments to increase revenue. Not none, I wouldn't say none, but far more limited than for the union government. So one can be sympathetic to the agrarian. But nonetheless, we must also say that there's been no serious effort to explore these avenues further and or to mobilize other states in a common fight against the increasing centralization resorted to burial in Ghana. Thanks a lot for joining us, sir, and laying out what this budget means for everyone. And thanks a lot for joining us.