Editorial: TN’s five-step path to progress

This week, the Tamil Nadu government pulled off a coup of sorts, when it announced the leading experts who would comprise the Economic Advisory Council to Chief Minister MK Stalin. Nobel laureate Esther Duflo who shared the Nobel Prize in 2019 with her husband economist Abhijit Banerjee, for their work on the alleviation of global poverty, is one of the members of this team. Apart from Duflo, RBI former Governor Raghuram Rajan, former Chief Economic Adviser Dr Arvind Subramanian, development economist Prof Jean Dreze and former finance secretary Dr S Narayan have also been onboarded to prepare a roadmap for rapid and inclusive growth of TN.

Their appointments are being viewed as a progressive shift for TN towards a scholarly approach to problem-solving. This might not be the first time that reputed economists have served as economic advisers to Chief Ministers. Abhijit Banerjee serves as the head of a global advisory body, that guides West Bengal CM Mamata Banerjee in mitigating the economic fallout of the pandemic. However, this is perhaps the first time that any state has opted for such a structured approach to economic policymaking, envisioned by a council of advisers. And team Stalin needs to bring out all the big guns, considering Tamil Nadu’s fiscal scenario.

Governor Banwarilal Purohit described TN’s debt-ridden situation as precarious with persistent high revenue and fiscal deficits, and a large overhang of debt. Tamil Nadu also had the dubious distinction of budgeting for a fiscal deficit of Rs 59,346.3 cr as per budget estimates for 2020-21, which is the highest among states and union territories in India. Purohit, however, added that people have high expectations from the new government.

Interestingly, this five-member team was put together by the state’s Finance Minister PTR Palanivel Thiagarajan, a former investment banker, who said it was the CM’s ambition to bring together the finest minds working in economics today. The Tamil connect is a unifier that runs deeply within this panel. Three of the council members – Rajan, Subramanian and Narayan are Tamilians. Duflo is known for her work in evidence-based policymaking, and she has been working with Tamil Nadu through the Abdul Latif Jameel Poverty Action Lab (J-PAL), which she co-founded with Banerjee. Rajan is part of a select group of economists who had forecast the 2008 global financial crisis.

Similarly, Subramanian is considered instrumental in bringing fresh perspectives to the Centre’s annual economic surveys, where he spoke of India’s deepening twin balance sheet crisis. In the aftermath of the pandemic and the job losses, states have been looking at alternative sources of employment for migrant workers in rural India. The MGNREGS has been considered for the same. And it is no surprise that the welfare economist Prof Dreze, who happens to be the brain behind MGNREGS, has also been onboarded in this council. And there is Narayan, who has first-hand experience navigating the nation’s labyrinthine economic corridors and is the author of The Dravidian Years - Politics and Welfare in Tamil Nadu.

These heavyweights being brought together to guide policymaking speaks volumes about the far-sighted approach and vision of the new government. As an economic powerhouse, one cannot underestimate the value TN brings to India. While Maharashtra makes the maximum of 13.88% contribution to India’s GDP, Tamil Nadu follows right after with a sizeable 8.59% (as per FY2018-19 figures). The benefit of having advisers encompassing a range of expertise is that policymakers can be guided by logic and deliberation, as opposed to the whims of select groups, that might discount long-term yields for short-term gains. If TN’s gambit works, it could be a blueprint for the rest of the Indian states, which could tap into the global economic talent pool. It will be an acid test for this panel to work in synergy with the state, keeping in mind its numerous challenges, and setting an example of helping devise coherent policies with real-world tangible benefits.