Home Financial responsibility No state broke treasury with freebies – TN Finance Minister Thiaga Rajan on Modi’s caution

No state broke treasury with freebies – TN Finance Minister Thiaga Rajan on Modi’s caution


Chennai: Returning to Prime Minister Narendra Modi’s targeting of opposition parties over the giveaway issue in recent months, Tamil Nadu Finance Minister Palanivel Thiaga Rajan said on Saturday that no Indian state had yet caused the breach of the Treasury.

Asking on what basis the union government tells the states how to spend money as long as borrowing (by the states) is within the limit, Rajan also asserted that people elect governments on the basis of how whose money they spend.

“I have yet to see a state where the provision of gifts has broken the treasury or the balance (the financial balance of the state)…I don’t think there is a state that has violated the borrowing limit and went bankrupt,” Rajan said.

The Tamil Nadu Finance Minister was speaking at a conference in memory of the famous literature enthusiast, chartered accountant and co-founder of the Manthan public forum, the late Ajay Gandhi, in Hyderabad.

This is not the first time that Rajan has hit out at the union government and Prime Minister Narendra Modi over the latter’s criticism of ‘revadi’ culture.

In July, Modi, at the inauguration of the Bundelkhand highway in Uttar Pradesh, warned of the “revadi culture” of giving gifts for votes, and also said the practice was “very dangerous” for the country.

The following month, Rajan lashed out at the comments and asked on what constitutional basis or special expertise the Center was advising states on this, and why should states change their policy.

On Saturday, Tamil Nadu’s finance minister said state borrowings are often assessed under the Fiscal Responsibility and Fiscal Management (FRBM) Act 2003, which sets limits on debt and fiscal deficit under certain conditions.

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“Tamil Nadu contributes enormously to the national treasury”

“Why should the Union government or anyone else tell us how we should spend our money while borrowing is under the limits?” Rajan asked, adding on what basis should states listen to the union government without a proven track record of effective Center debt management.

At a meeting in April, senior officials had warned the Prime Minister of the drain on resources caused by the culture of giveaways, citing the possibility that a crisis similar to that in Sri Lanka could emerge in some of these states.

Rajan questioned whether the Center had performed better than any state in dealing with debts, adding that every year states received two letters from the union government warning against borrowing.

He also pointed out how Tamil Nadu was a huge net contributor to the national treasury.

Calling the complex GST (goods and services tax) models, with tariff structures and multiple exemptions, Rajan said GST Board meetings have never had conversations based on the data submitted by the States.

Rajan also underscored the importance of decentralization of power and local governance in the country, adding that the capacity for execution suffers if governance is done at the same time.

(Editing by Poulomi Banerjee)

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