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POVERTY REDUCTION STRATEGY TN

for the five-year period

for the five-year period Tamil Nadu has been given a total grant of Rs. 4135 crore by the TFC. A grant of comparable magnitude has never been given to Tamil Nadu by earlier FCs. f. Structure of Expenditure Revenue expenditure constitutes by far the largest share of total expenditure. Of which, interest payments and pensions constitute important components of committed expenditures. Revenue expenditures as a whole have been rising since 1995-96 when it was about 13.1 percent of GSDP. It rose to a peak of about 15.4 percent in 1999-00, fell marginally and rose to 16.2 percent of GSDP in 2002-03, and fell there after and rose to 15.8 percent of GSDP in 2008-09 RE. In 2009-10 BE, these are slated to be 15.0 percent of GSDP (Table 3.1) Within revenue expenditures, the expenditures on health and education are of critical importance. Table 3.5 shows that the share of revenue expenditure on education in 2009-10 BE is lower than what it was in 2001-02. The share of health expenditure has increased by a small margin but it has not reached one percent till 2009-10 BE. Table 3.5: Expenditure on Health and Education in Tamil Nadu (Rs. crore) Sector 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 RE2009-10 BE Education 4058.74 3970.17 4402.55 4597.28 4915.51 5967.91 6732.08 9166.81 10472.56 Health 858.63 865.04 944.28 1304.16 1392.87 1551.97 1737.06 2474.27 2995.50 (% to GSDP) Education 2.83 2.56 2.61 2.43 2.32 2.56 2.23 2.63 2.65 Health 0.6 0.56 0.56 0.69 0.66 0.67 0.58 0.71 0.76 Source (Basic Data): State Budget Documents and Budget speech 2009-10. Note: Education includes general and technical education Health includes medical and public health and family welfare. A major contribution of state finances to the state economy comes in the form of capital expenditure, particularly if it is devoted to building infrastructure (Chart 3.5). In Tamil Nadu it has been rather low in the nineties remaining less than one percent of GSDP. However, since 2003-04, it has been rising and it is now close to the benchmark of 3 percent suggested by the Twelfth Finance Commission. These have been increasing over time in per capita terms (see Appendix Table 3.2 for per capita poverty reducing expenditures in recent years). This trend has to be strengthened further. 60

Chart 3.5: Capital Outlay as percent of GSDP: Growing but Inadequate 3.00 2.50 2.00 2.04 2.27 1.81 2.27 2.47 2.55 2.55 1.50 1.33 1.00 0.50 0.90 0.93 0.71 0.97 0.92 0.48 1.05 1.19 1.03 0.00 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 RE 2009-10 BE Capital outlay 3.3 Fiscal Restructuring for MDGs Based Poverty Reduction Fiscal restructuring in Tamil Nadu has to be undertaken in a medium term framework in the context of the Fiscal responsibility and Budget Management Act (FRBMA). Fiscal Responsibility Act Tamil Nadu was amongst the first few states to enact Fiscal Responsibility Act, which lays the foundation for aggregate fiscal discipline. This Act aims at ensuring fiscal stability and sustainability for Tamil Nadu while enhancing the scope of improving social and physical infrastructure as well human development. It emphasizes, for this purpose, the need for achieving revenue surplus, reduction in fiscal deficit, and prudent management of debt. It envisages limits on fiscal and revenue deficits as well as government guarantees. It also places emphasis on the need for greater transparency and provides for a medium term fiscal framework. The fiscal responsibility legislation envisages that the following documents be included in the budget. a. Macroeconomic Framework Statement This Statement contains an overview of the State’s Economy, an analysis of growth and sectoral composition of GSDP, an assessment related to State Government finances and future prospects. 61

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PDF: 1.0MB - Population Reference Bureau