ECONOMIC REFORMS. Jean Dreze: Healthcare must receive even more attention than it has already got in Tamil Nadu

* Universal quality education, health care and social security are still distant goals

* A well-designed system of emergency cash transfers would be quite useful in this situation of recurrent crises, which may last for years

* Public expenditure on health is just 0.6 per cent of the state domestic product in Tamil Nadu, one of the lowest ratios among Indian states

* The question is how much can be done before the economy revives, and of course, how to make sure that the burden falls mainly on the privileged

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The Tamil Nadu government hopes to revitalise the state’s economy and ensure that the benefits of economic growth reach all segments of society with the constitution of an Economic Advisory Council to Chief Minister MK Stalin. The council, Governor Banwarilal Purohit announced last week, will consist of former RBI governor Raghuram Rajan, Nobel laureate Esther Duflo, former Chief Economic Advisor Arvind Subramanian, former Union finance secretary S Narayan and development economist Jean Dreze.

In an exclusive email interview to BL ink , Dreze talks about the council’s scope, the potential for reforms and how the rewards of the state’s long history of public action for human development and social justice are unlikely to go away so soon.

The council’s role, as we understand, is to advise the government on how to revitalise Tamil Nadu’s economy. Given that broad goal, especially during another pandemic year that has devastated the economy, what are the areas that have the most potential for reform?

The council’s terms of reference are actually wider than the revitalisation of the economy. In fact, the first item is “economic and social policy, social justice and human development related issues”, with a special focus on disadvantaged groups. So the canvas is quite broad. But of course, the council’s work will have to be selective. The main thing, I think, is to identify issues on which we can give some useful advice, given our respective domains of competence and also our areas of agreement. For instance, I think that all of us will agree about the urgency of doing more to support poor people in this crisis. That would also help to revive the economy. Of course, it may require some resource mobilisation. Valuable suggestions in this regard have already been made last year in an excellent report prepared by a high-level committee headed by Dr C Rangarajan.

Southern states such as Tamil Nadu have always been known to have better human development indicators than their northern counterparts. We know that the Left and Dravidian movements have played a significant role in ensuring better governance prioritising on healthcare, literacy and safety nets for the poor. In a state like Tamil Nadu which already has strong social welfare schemes, what are the gaps left to ensure that benefits of economic growth reach all segments of society?

One important thing, I feel, is to ensure that the momentum you are talking about, towards comprehensive social support, is not derailed by the Covid-19 crisis or a fiscal crunch. Tamil Nadu’s public services are certainly better than those of many other states, but there is still tremendous scope for expansion and improvement. Universal quality education, healthcare and social security are still distant goals. For instance, the coverage of social security pensions in Tamil Nadu is still quite low, at about 4 per cent of the population compared with 10-15 per cent in other southern states. Aside from consolidating existing schemes and programmes, some new initiatives may be required. For instance, a well-designed system of emergency cash transfers would be quite useful in this situation of recurrent crises, which may last for years. And of course, healthcare must receive even more attention than it has already received in Tamil Nadu. Public expenditure on health is just 0.6 per cent of the state domestic product in Tamil Nadu, one of the lowest ratios among Indian states.

In recent years some of the problems plaguing Tamil Nadu have been the lack of investment in the state, a fall in manufacturing resulting in unemployment and brain drain. What are some measures to boost investment inflows, employment and particularly female workforce participation?

Tamil Nadu’s economy has actually done quite well during the last 10 years or so, until it was hit by the Covid-19 crisis like other states. In fact, it maintained a growth rate of 8 per cent or so right up to 2019-20, even as the Indian economy lost steam year after year from 2016 onwards. Not only are production indicators rising quite nicely, real wages have also been rising faster in Tamil Nadu than in most Indian states, according to Labour Bureau data. Tamil Nadu has become a major destination for migrant workers, and also has one of the highest rates of female workforce participation in India. So I think that the main thing, for now at least, is to manage this crisis as well as possible. If the damage can be contained, there is a good chance that Tamil Nadu will be able to return to its earlier trajectory of fast economic growth combined with rapid social development. The rewards of the state’s long history of public action for human development and social justice are unlikely to go away so soon.

The government’s twin concerns pertain to improving the state’s fiscal position and lowering its debt burden. How would you address these?

Other members of the council are far more knowledgeable than me on these matters and I would not want to jump the gun with specific recommendations. In general terms, the Rangarajan Committee report suggests that there is much scope for better resource mobilisation in Tamil Nadu. Indeed, the state’s own tax revenue as a proportion of domestic product has been declining, even before the introduction of GST. Many taxes and fees have not been revised for a long time, from property taxes and power tariffs to vehicles taxes and royalties on minerals. For instance, property taxes have not been raised since 2008. Quite likely, compliance levels can also be improved. The question is how much can be done before the economy revives, and, of course, how to make sure that the burden falls mainly on the privileged. It is amazing how little they have been asked to contribute so far in this crisis.