Editorial: TN’s Five-Step Path to Progress
This week, the Tamil Nadu government pulled off a sort of coup, when it announced the key experts who would make up Chief Minister MK Stalin’s Economic Advisory Council. Nobel laureate Esther Duflo who shared the Nobel Prize in 2019 with her husband economist Abhijit Banerjee, for their work on reducing global poverty, is one member of this team. Besides Duflo, former RBI Governor Raghuram Rajan, former chief economic adviser Dr Arvind Subramanian, development economist Professor Jean Dreze and former finance secretary Dr S Narayan also were invited to prepare a roadmap for rapid and inclusive growth of TN.
Their appointments are seen as a gradual shift for TN towards a scholarly approach to problem solving. This may not be the first time that prominent economists have served as economic advisers to chief ministers. Abhijit Banerjee heads a global advisory body that guides CM Mamata Banerjee of West Bengal in mitigating the economic fallout from the pandemic. However, this may be the first time that a state has opted for such a structured approach to economic policy, envisioned by a council of advisers. And the Stalin team must bring out all the big guns, given the Tamil Nadu fiscal scenario.
Governor Banwarilal Purohit called TN’s debt situation precarious with high and persistent income and budget deficits, as well as significant debt distress. Tamil Nadu also had the dubious distinction of budgeting for a budget deficit of Rs 59,346.3 cr according to budget estimates for 2020-2021, which is the highest among the states and union territories in India. Purohit, however, added that people have high expectations of the new government.
Interestingly, this five-member team was put together by State Finance Minister PTR Palanivel Thiagarajan, a former investment banker, who said the CM’s ambition is to bring together the best minds working in the economic field today. The Tamil connection is a unifier that runs deep in this panel. Three of the board members – Rajan, Subramanian and Narayan are Tamils. Duflo is known for her work in evidence-based policy making, and she has worked with Tamil Nadu through the Abdul Latif Jameel Poverty Action Lab (J-PAL), which she co-founded with Banerjee. Rajan is one of a select group of economists who predicted the 2008 global financial crisis.
Likewise, Subramanian is seen as essential in bringing new perspectives to the Centre’s annual economic surveys, where he spoke about the worsening double-balance sheet crisis in India. In the aftermath of the pandemic and job losses, states have sought alternative sources of employment for migrant workers in rural India. The MGNREGS was considered for the same. And it’s no surprise that wellness economist Professor Dreze, who happens to be the mastermind behind MGNREGS, was also included on this board. And there’s Narayan, who has first-hand experience navigating the country’s labyrinthine economic corridors and is the author of The Dravidian Years – Politics and Welfare in Tamil Nadu.
These heavyweights brought together to guide policy making speak volumes about the new government’s far-sighted approach and vision. As an economic powerhouse, the value TN brings to India cannot be underestimated. While Maharashtra contributes a maximum of 13.88% to India’s GDP, Tamil Nadu follows just behind with 8.59% (according to 2018-19 figures). The advantage of having advisers encompassing a range of expertise is that decision-makers can be guided by logic and deliberation, as opposed to the whims of selected groups, which could rule out long-term returns for short-term gains. . If TN’s bet works, it could be a model for the rest of the Indian states, which could tap into the global pool of economic talent. It will be a litmus test for this panel to work in synergy with the state, bearing in mind its many challenges, and leading by example to help design coherent policies with tangible real-world benefits.