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POVERTY REDUCTION STRATEGY TN

. Medium Term Fiscal

. Medium Term Fiscal Policy Statement This statement contains three year rolling targets of revenue deficits (RD) relative to total revenue receipts (TRR), gross fiscal deficit (GFD) as a percentage of GSDP and total outstanding liabilities as percentage of GSDP. This statement includes various assumptions behind the fiscal indicators and an assessment of sustainability relating to: (i) the balance between revenue receipts and revenue expenditure; (ii) the use of capital receipts including borrowings for generating productive assets; (iii) the estimated yearly pension liabilities worked out on actuarial basis for the next ten years. Table 3.6 gives the Tamil Nadu Medium Term Fiscal Policy statement going up to 2011-12. It shows a fiscal deficit which is below 3 percent of GSDP with zero revenue surplus. c. Fiscal Policy Strategy Statement As per the provisions of the FRBMA, the Fiscal Policy Strategy Statement contains the following: (i) Fiscal policies of the State Government for the ensuing year relating to taxation, expenditure, borrowings and other liabilities, lending, investments, contingent liabilities, user charges on public goods/ utilities and description of other activities such as guarantees and activities of Public Sector Undertakings. (ii) Strategic priorities of the State Government in the fiscal area for the ensuing year. (iii) The key fiscal measures and the rationale for any major deviation in fiscal measures pertaining to taxation, subsidy, expenditure, borrowings and user charges. (iv) Evaluation of current policies of the State Government vis-à-vis the fiscal management principles. Table 3.6: Tamil Nadu Medium Term Fiscal Policy Statement: Budget 2009-10 (Percent) Fiscal Indicators Actuals Projections Revenue surplus as % of total revenue receipts As percentage of GSDP 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 05 06 07 08 09 BE 10 BE 11 12 -2.47 5.75 6.47 9.57 0.01 -1.76 0.11 0.12 Revenue Surplus -0.37 0.92 1.04 1.50 0.00 -0.26 0.00 0.00 Fiscal Deficit 2.95 (-)1.06@ 1.56 1.32 2.65 2.99 2.73 2.73 Outstanding Liabilities 26.45 27.23 23.72 21.40 21.42 21.61 21.69 21.76 Own Tax Revenues 10.25 11.02 11.95 9.80 9.89 9.76 9.63 9.30 Note: @ this includes an adjustment of prior period capital expenditure amounting to Rs. 224.90 crore. Excluding this, fiscal deficit would be 2.86 percent of GSDP. 62

The Fiscal Policy Strategy Statement has nine Disclosure Statements regarding select indicators of fiscal situation, components of state government liabilities and interest cost of borrowings, Consolidated Sinking Fund, guarantees given by the state government, outstanding risk-weighted guarantees, guarantee redemption, assets, revenue demands raised but not realised and outstanding miscellaneous liabilities. The state’s medium term expenditure policy has to be consistent with its FRBMA. The deficit reduction targets have to go hand in hand with expenditure restructuring so as to achieve the objectives of the Act while bringing about fiscal restructuring that would facilitate achieving MDGs base poverty reduction in Tamil Nadu. 3.4. Medium Term Fiscal Reforms for MDGs Based Poverty Reduction Tamil Nadu’s Fiscal Policy, although serving well, can be further strengthened and directed towards MDGs based poverty reduction. Expenditure reforms are key to this objective. The following are some of the key proposed components of restructuring. a. Increasing Share of Expenditure on Health and Education Expenditures translate into outputs in the short run and outcomes in the final analysis. Thus, expenditure on education translates into changes in the literacy rate and other educational attainments. Similarly, expenditure on health makes an impact on lowering of IMR, MMR, and increasing life expectancy. In the case of capital expenditures also, there is need to focus on the quality and form of capital expenditure. For improving health infrastructure in the rural areas, we have focused on the national norms for provision of rural health infrastructure. National norms suggest the provision of at least one sub-centre per 5000 population, one primary health centre (PHC) per 30,000 population and one community health centre (CHC) per 1,20,000 population in plain areas. We have used these norms to examine the adequacy of physical health facilities in rural Tamil Nadu. The structure of health facilities in Tamil Nadu differs from most other Indian states. The state does not have CHCs, but has some upgraded PHCs which are comparable to CHCs. The state however has a number of taluk and non-taluk hospitals at the sub-district level which are not there in most other states. As per information provided by the state government on capital and recurrent cost of building new SCs and PHCs, the capital cost of building new SCs, PHCs and upgraded PHCs is about Rs. 63 crore. To this, if one adds the cost of replacing rented buildings of SCs and PHCs by 63

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PDF: 1.0MB - Population Reference Bureau