2 Strategic moves that can lay the foundation to make Tamil Nadu a Super Developed State

Tamil Nadu is facing an economic crisis as the revenue-generating capacity is limited

Tamil Nadu is currently facing a multi-pronged economic crisis, the state is reeling under severe pressure of meeting its financial expenses. The state’s total debt stands at over 5 lakh crore. The revenue-generating capacity of Tamil Nadu is limited as any other state in India with the formulation of the GST. The state majorly gets its revenue from TASMAC (state-run alcohol shops[1]), stamp duty, and excise duty on petrol and diesel.

In order to overcome this crisis and jump back to its feet the state needs to do 2 major things, a series of 4 expressways linking the state capital & major districts that are of economic importance with export ports and in parallel start the process to make Chennai as the next-gen Financial Capital.

We need four massive 8-lane Expressways, i.e. Chennai – Madurai, Chennai – Coimbatore, Chennai – Thoothukudi, and Coimbatore – Madurai – Thoothukudi link expressway to kickstart the growth, expenditure, and sustained revenue generation.

We must note that National Highways, although they are in good condition mostly they are of 4 lanes and it is controlled by the Central Government, all the revenue generated via tolls go to the central government and not to the state government

When we already have National Highways then why do we need expressways in the first place?

The 7^th schedule of the constitution talks about the devolution of powers as union list, state list, and concurrent list. Basically, it states that the Union government has power over certain departments and the state has some and there is a concurrent one in which both state and central can have power. Eg. Railways, Airports are all solely under the Union Government, the state can’t exercise its powers or generate revenue from these, similarly, direct taxes and indirect taxes come under the central government.

Like Railways, there are 97 departments that fall under the Union List and the other catch is that if there is a law or statute on a subject in the concurrent list which is formulated by Union Government and state government. Central government law takes the upper hand so basically, the Central or Union Government has substantial power in controlling the country and also the revenue generation mechanism. What is leftover are around 60 subjects which are under state list Eg. Alcohol is under the state list.

We must note that National Highways, although they are in good condition mostly they are of 4 lanes and are controlled by the Central Government, all the revenue generated via tolls go to the central government and not to the state government since it was exclusively sponsored under central funds. In the case of expressways, the state gets leverage to collect tolls as it’s dedicated work by the state government. The collection of tolls comes under the state list so building expressways paves way for a sustained generation of revenue through tolls and all its proceeds will go solely to the state government. This is the primary reason why states like UP and Maharashtra are building expressways exclusively from the state’s treasury.

Why only these 4 routes?

To understand why we need 4 Expressways, we need to understand the geography, demography, and economy of Tamil Nadu. Tamil Nadu can be organized into 4 zones, the Northern areas i.e., the Tondaimandalam comprising Chennai and its neighboring districts. The Western Areas i.e., the Kongu Belt comprising Coimbatore, Salem, Erode, etc. The Eastern region – i.e., the Cauvery delta districts such as Thanjavur, Nagapattinam, Thiruvarur, etc, and the Southern & Central regions – Basically Madurai, Tiruchi belt.

Each zone is unique and specialized in certain areas but unfortunately, all the zones are highly disorganized i.e., not directly interlinked. Eg. Kongu Belt is known for Textiles, Erode and Tiruppur have numerous factories and provide large-scale employment, while the Northern areas are specialized for services Industry and IT sector which dominates even today in Chennai along with Industrial Hubs.

Building expressways alone won’t help, it has to be coupled with captive mini export airstrips and mini export ports along the expressway coast so that the stress on International airport and seaports is reduced

This disorganized functioning creates several bottlenecks, the goods and supplies, and finished products are in one region and the population which consumes is in another region. All these are functioning in clusters rather than working in synergy to make utilization of finished products and improve the per capita income. The state has an excess of agricultural produce and the excess is either rotting in the mandis or is internally distributed at cheap prices, therefore, the farmer’s capacity to earn more from his production is limited. To improve the per capita the excess supply needs to be exported and to facilitate exports we need these expressways. The primary reason for Expressways is resource mobilization in a small time period.

The maximum goods and cargo that are transported in the state lie between Chennai – Coimbatore (especially for textiles), Chennai – Thoothukudi along the eastern coast of Tamil Nadu, and Chennai – Madurai for small, medium, and micro industries (such as firecrackers), etc. Right now the resources are mobilized using the National Highways which means the proceeds gained via tolls go to the central government, this needs to be channelized to the state government and that can be done only via Expressways. Textile clusters would get access to Thoothukudi port via Coimbatore – Madurai – Thoothukudi expressway. Similarly, cottage industries in Madurai and the surrounding region would benefit. Delta region farmers would be able to export via Chennai – Thoothukudi routes. So 1 dedicated expressway for Agriculture (Chennai Thoothukudi Corridor), Textiles (Chennai Coimbatore Corridor), MSME (Chennai Madurai Corridor), and 1 for interlinking to Export (Coimbatore – Madurai – Thoothukudi) is needed.

Building expressways alone won’t help, it has to be coupled with captive mini export airstrips and mini export ports along the expressway coast so that the stress on International airports and seaports is reduced. There should be provision and space allocated along the expressways to make it a multi-purpose expressway such as Hyperloop, Gas pipelines, Water pipelines, etc. Resource Mobilization coupled with less turnover time helps in sustained higher returns.

There will be numerous benefits due to these expressways

• Firstly, along with employment generation and stimulating economic activity, it’s a long-term sustained revenue generation machinery for the state. Connecting to mini seaports doubles the bonus.
• Secondly, it reduces reliance on alcohol promotion, currently, the state generates revenue using alcohol, which is a violation of the directive principles of state policy stated in the constitution. Since the state has limited powers to generate revenue it uses alcohol and population to its advantage.
• Third, it reduces reliance on central funds and also ensures that it facilitates the improvement of the per capita income of farmers through export promotion.
• Fourth, the major issue of decongesting cities can be done by expressways. The state can ask IT and Electronic firms to set up workers/staff quarters along the expressways and earn a good amount via stamp duty and lease.

Chennai is in a good position with regards to human capital and there is quality talent but it lacks 2 things, a Finance Industry promotion atmosphere and a world-class Airport

Chennai as a next-gen Financial Capital of Tamil Nadu

The State Capital of Tamil Nadu needs a next-generation overhaul especially for its economy and its way of functioning. There is a direct correlation between per capita and a city with a high concentration of financial institutions. Be it New York or London or Shanghai or Singapore or Hong Kong, all these cities have high per capita when compared to other cities in their respective countries because of the concentration of Finance and Trade in these cities.

All these major cities have great ports, airports, tech professionals, and most importantly finance professionals. Chennai has the same features as these cities such as having a large port, airport, and presence of quality human capital and nothing should stop it from aspiring to be a next-gen Finance Capital.

Currently, Chennai is dominated by Software Services and Industries (called as “Detroit of South Asia”) but this will not last long as the advent of Automation and AI is on the cards[2]. The city will be sustainable only if it adapts itself to the age, else the story of Calcutta will be inevitable to Chennai. Right now, we are at the doorstep of an AI revolution. 2000-2010 can be described as the decade of data and from 2010 onwards the streamlining of data is taking place, once the streamlining is set the Machine Learning and AI era will start as there is enough volume of clean and structured data to derive deep insights and start the value addition of AI.

Chennai needs to capitalize before the advent of the AI era. Chennai is in a good position with regards to human capital and there is quality talent but it lacks 2 things, a Finance Industry promotion atmosphere, and a world-class Airport. Chennai needs to have a dedicated financial city in its neighborhood and it should incentivize global Investment Banks, Private Equity & Venture Capital to have offices there, this when coupled with the tech talent will usher in a Fintech revolution.

Mumbai ushered in an economic revolution in the 1990s when liberalization took place, now the city is saturated as there is no space on the Island of Mumbai so they have shifted towards Navi Mumbai. Bangalore is a Tech Hub and even that is saturated, Hyderabad and Chennai are the only places where land is still available and Hyderabad has a lead in this with the presence of a Financial District SEZ but its geographic disadvantage of no port and no sustainable water resource gives an edge to Chennai, Tamil Nadu government needs to move fast in this space to ensure that it doesn’t miss out a great opportunity.

Note:
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.

References:

[1] Tasmac liquor shops see thousands gather for booze, Tamil Nadu govt earns Rs 172 crore on first day of sales – May 08, 2020, India Today

[2] CHENNAI IS EMERGING AS DETROIT OF SOUTH ASIA – Live Chennai

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Venkat Sudheendra

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