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a. Macro Drivers The key

a. Macro Drivers The key to sustained poverty reduction is growth, particularly if it is accompanied by a high ‘elasticity of connection’ of people to the growth processes. Effective participation of the poor in the growth processes requires that the changing structure of the economy as a result of growth has to be taken into account. In the case of Tamil Nadu, the dynamics of growth is such that the share of services sector will grow as a result of the differentials in agricultural and non-agricultural growth rates. The growing demand for skilled and educated people in the services sector should be accompanied with a substantial increase in expenditure on education and skill training. At the same time, adequate investment in agriculture will ensure higher productivity for farmers who will continue to be linked with agriculture. While a state government has limited control on inflation, which is determined more by national level forces and policies, the state government can at least protect the poor through insurance or similar policy interventions in periods of high inflation or economic slowdown. It is desirable for Tamil Nadu to aim at a growth rate that is at least 0.5 to 1.0 percentage points higher than the National Gross Domestic Product (GDP) growth rate on a sustained basis. If the real GDP growth rate is likely to average at about 9 percent (leaving out the current slowdown phase), the Tamil Nadu GSDP should aim to grow at 9.5 to 10.0 percent per annum in the medium term. Given Tamil Nadu’s relatively lower growth of population, this could translate into higher growth in per capita incomes of about 1.5 to 2.5 percentages to the average for India. This will require attracting considerable investment from the rest of India and abroad. These trends will lead to a reduction in rural poverty both by reduction of the head count ratio in rural areas, and migration of some poor to the urban areas. b. Augmented Fiscal Space The medium term management of government finances should be such as to create additional fiscal space for undertaking higher expenditures on all aspects of MDGs-based poverty reduction, viz., income poverty, health, education, and gender related issues. It is possible that additional fiscal space for undertaking higher primary expenditures relative to GSDP can be created, comparing the 2007-08 RE and 2014-15 projections. Of this, nearly one percentage point of GSDP can come from the revenue side and about 0.3 percent of GSDP from lower interest payments. It is shown that primary (non-interest) expenditure, considering revenue and capital expenditure together, can grow from 16.5 percent of GSDP in 2007-08 RE to about 18.9 percent in 2014-15. Table 7.1 summarises the potential of creating additional fiscal space and resultant restructuring of expenditures. 168

Table 7.1: Adjustment during 2007-08 and 2014-15 Projection (Percent to GSDP) Fiscal Indicators 2007-08 2014-15 2014-15 minus 2007-08 RE Own Tax Revenues 10.11 10.95 0.84 Total Revenue Receipts 16.08 17.06 0.98 Interest Payments 2.13 1.84 -0.29 Pensions 2.32 1.76 -0.56 Education 2.56 4.93 2.37 Medical and Public health 0.66 1.27 0.61 Other Social Services 2.63 2.00 -0.63 Total Social Services 5.85 8.20 2.35 Economic Services 2.72 2.47 -0.25 Total Revenue Expenditure 15.77 16.33 0.56 Revenue Surplus 0.32 0.73 0.41 Fiscal Deficit 2.56 3.00 0.44 Primary Deficit 0.44 1.16 0.73 Capital Expenditure 2.88 4.38 1.50 Total Expenditure 18.65 20.71 2.06 Primary Expenditure 16.52 18.87 2.35 Outstanding Liabilities 22.73 22.36 -0.38 Source: As in Table 3.7. c. Structuring Government Expenditure towards MDGs It has been indicated in this study that it is feasible to substantially increase allocations to health and education as well as capital outlay in Tamil Nadu, in the period from 2008-09 to 2014-15. In particular, based on a set of assumptions, expenditure on education can be increased from about 2.6 percent of GSDP in 2007-08 RE to close to 5 percent of GSDP by 2014-15. In the case of health (Medical and Public Health and Family Welfare), expenditure can be raised from 0.66 percent of GSDP in 2007-08 to 1.27 percent, implying a near doubling of the share relative to GSDP. Capital expenditure (net of repayments) can and should be raised from 2.9 percent of GSDP to 4.6 percent during the same period. In contrast, the expenditure on interest payments and to some extent pensions would be reduced. There would also be reduction relative to GSDP in some general and economic services. d. Targeting With the availability of additional fiscal space, the next step is to allocate it in a manner that MDGs based poverty reduction is effectively achieved. We suggest a four-tier 169

World Comparative Economic And Social Data
Police Stations - Tamil Nadu Police
N u m b e r o f S c h o o l s - DISE
Census 2011 population of Latur district
PDF: 1.0MB - Population Reference Bureau