Staring At A Bleak Future, Tamil Nadu Has To Face Up To These Six Challenges

Tamil Nadu has, over decades, through its sound agriculture base and proactive industrial growth, coupled with a robust subsidy system, made its way to the top of the Indian development ladder. Unlike Gujarat and Kerala, the state has been known for balancing its rapid expansion of economy with adequate strides in human development.

The second-largest economy in India, Tamil Nadu has always been known for its political stability, law-and-order situation, quality healthcare system and its tourism appeal. Always looked upon as a success story, the state is today, however, staring at a reversal of fortunes.

Tamil Nadu is going through a turbulent time now and the signs of a long phase of political, economic and social deterioration appear evident. In my view, here are six challenges for the state that need the leadership’s immediate attention:

The mystery of debt and growth

The Keynesian view argues that borrowing is not wrong per se, if it can create growth in an economy. Therefore, the state borrows money, spends it, creates some capital and initiates the spending cycle, which in turn pushes the overall economic activity upwards.

In Tamil Nadu, the case appears strange. The data suggests, on one hand, that the state has increased its debt the fastest in the last 15 years. The impact, however, has been quite lukewarm. That is, for the money borrowed, the acceleration in productive economic activity has not been proportionate.

First, we explore this across 15 large states, the quantum of gross domestic product (GDP) growth for the borrowing they have made. We use two time periods for this analysis, as GDP data is not available across states in one base year for the last 15 years. Since the absolute debt number across years is not adjusted for inflation, we use GDP at current prices to make the comparison, as this will negate the effect of inflation.

Between 2004 and 2014, we observe that Tamil Nadu’s debt increased by 13.8 per cent compound annual growth rate (CAGR) and was able to produce an absolute growth of 16.3 per cent CAGR. While on the face of it the growth looks reasonable, the fact is that 11 states out of 14 have been able to produce a higher GDP growth for their increase in quantum of debt. The table below depicts the same.

Further, if we consider the five fastest growing states, namely Bihar, Rajasthan, Tamil Nadu, Chattisgarh and Madhya Pradesh, all of them have managed a CAGR of more than 16 per cent with a single-digit debt growth. But not Tamil Nadu, whose debt had grown in double digits. States like Odisha have managed a 15 per cent CAGR of GDP with just 3.5 per cent CAGR of debt.

One may argue that all these states are underdeveloped when compared to Tamil Nadu, and so they may have a low starting point advantage and therefore this result. Well, the answer is no. States like Gujarat and Maharashtra, which have recorded over 15 per cent CAGR, have been able to achieve this at around 10-11 per cent CAGR of debt.

This becomes even more evident when we see the state’s numbers in an isolated manner over two time periods. The returns to debt are decreasing, especially in relative terms, in comparison to other states. This means that Tamil Nadu is continuing to borrow at a rapid pace and not able to convert that into commensurate GDP growth. The graph below captures this fact.

Falling investments and struggling industries

Over the years, states like Tamil Nadu, Maharashtra, Gujarat and now Rajasthan and Karnataka have been recognised for their industrial growth. However, key data suggests that over the last few years, Tamil Nadu’s industrial sector is no longer as vibrant as it is spoken about. The Industrial Entrepreneurs Memorandums (IEMs) filed are one good publicly available indicator of industry activity and confidence. The data for the last nine available years indicates that new investment memorandums have been falling rapidly in the state. From 393 in 2007, it fell to 94 in 2014. In fact, in 2006, the figure stood at over 700.

Next, we take a cross-sectional view of IEMs filed across Indian states, to check where Tamil Nadu stands. First, we see that the South Indian state is high on the table in terms of total number of IEMs filed between 2008 and 2015 with around 196 IEMs filed on average every year. However, the story changes when we explore how many of these IEMs have started operations. Only about 9 per cent of the IEMs filed have progressed to the next stage and commenced operations.

In addition, interesting insights emerge when we analyse the proposed investment through IEMs and how much has actually been invested. From 2011 to 2015, about Rs 155,807 crore worth of investments were proposed, of which only Rs 5,620 crore were actually invested, which makes up a poor 3.6 per cent.

Tamil Nadu stands at the bottom of the table when conversion rates of proposed investments are considered alongside that of Kerala, Odisha, West Bengal and Bihar.

We must also consider that the micro, small and medium enterprises (MSME) sector has slowed down. The contribution of the MSME sector to state GDP is around 10 per cent. This sector, which provides employment to about 63.18 lakh persons, is showing signs of stagnation. According to the fourth all-India MSME census, Tamil Nadu has the second-highest number of sick enterprises (11.41 per cent) and reported the highest number of closed enterprises in the country. It also reported the second-highest share of non-working enterprises (12.79 per cent).

At this juncture, it is also worth mentioning that Tamil Nadu did not figure in the top 15 (ranked 18) in the ease of doing business released by the Commerce Ministry last year, a slide from the rank 12 in the previous year.

The education khichdi

For decades, Tamil Nadu has built up good education infrastructure, increased overall literacy rates at a rapid pace and ensured almost everyone enters schools at the primary level. In fact, Tamil Nadu was one of the first states to introduce a robust mid-day meal scheme to ensure the kids do not drop out. Therefore, the quantity is not a problem here, the quality of education is.

First, the learning levels among students. Any rational person would assume that the state would lead the table of student learning levels given the tall claims political parties in Tamil Nadu make about development in the state. However, the graphs below summarise the reality.

We compare with large states (union territories and small states like Goa are not included) which have a literacy rate of 75 per cent and above. Tamil Nadu stands at rank nine out of the top 10 literate states in primary rural reading levels, where an almost whopping 55 per cent of kids in Class V cannot read a Class II book.

When we consider arithmetic abilities, Tamil Nadu moves only two ranks higher on the list and still stands at a dismal seventh rank with almost 79 per cent of Class V kids not able to solve a simple division problem.

Though the all-India learning levels have witnessed a decline over the last few years, Tamil Nadu has always fallen below the national average. While there are many such examples, let us consider two.

It should be pointed out here that indicators such as enrolment ratio and dropout rate are of lesser significance in developed states like Tamil Nadu, as it has almost reached the highest achievable numbers in the country. Therefore, what matters now is what the students learn and, unfortunately, that presents a sad state of affairs.

If this is the case of primary education in the state, higher education seems worse. When we compare national-level competitive exams like the Joint Entrance Examination (JEE), the performance of Tamil Nadu students has been below par. A meagre 17 per cent of the state’s students were selected for the advanced round of the JEE in 2015-16 and 22 per cent in 2016-17. The figures were 38 per cent and 36 per cent respectively for Andhra Pradesh, and over 32 per cent for the newly formed Telangana.

A Swarajya article recently reported that only 792 students from Tamil Nadu made it into the Indian Institutes of Technology, National Institutes of Technology and Indian Institutes of Information Technology, whereas Madhya Pradesh, with similar sizes of population and lesser development, sent about 1,757 students.

Even when it comes to the recent National Eligibility cum Entrance Test (NEET) exams, Tamil Nadu fared the poorest among the southern states with a meagre 41 per cent pass percentage.

Other reports and Right to Information data reveal further disturbing but true ground realities. The data shows that 50 per cent of the students in Anna University fail in their first-year semesters. Experts in the field further opined that around 90 per cent of these students belonged to state boards. The data from All India Council for Technical Education shows that one in every three engineering students fails to graduate within four years.

The situation is worse for post-graduate courses, where 40 per cent of the students did not complete the course in the stipulated time frame. Therefore, the Tamil Nadu government needs to introspect for radical course correction in its education sector rather than run to the central government for exception from national common merit exams year after year.

Water – a crisis in the making

Tamil Nadu has been known for its effective compulsory rainwater harvesting programme initiated by late chief minister J Jayalalithaa. However, recent water level trends in the state point at a deeper crisis building up, which may need larger interventions than just rainwater harvesting. We use a two-stage analysis to determine the gravity of the situation. First, we use the average groundwater-level data provided by the state government for the last seven months in 2017. This, as shown in the graph below, depicts how the average groundwater levels in all districts have fallen continuously in the last seven months vis-à-vis the same months in 2016.

Next, we use Central Water Commission data to track reservoir levels in Tamil Nadu and how it has been changing over the last couple of months. There are six major reservoirs in the state, namely Lower Bhawani, Metur, Vaigai, Parambikulam, Aliyar and Sholayar. All six reservoirs put together have a capacity of 4.229 billion cubic metre (BCM). As per figures from 27 July 2017, they were operating at about 0.467 BCM, which translates to about 11 per cent capacity.

Deeper analysis reveals other dangerous trends. Except Vaigai, all other reservoir levels have fallen as compared to last year. Water storage levels have fallen by 50 per cent from the corresponding period in 2016. When we compare with the last 10 years on average, the situation is more dismal. All reservoirs had a decadal average of over 50 per cent storage of live capacity, all of which have fallen below 25 per cent, including some in single digits such as in Vaigai and Metur.

Anti-social and separatist voices rising

Tamil Nadu, known earlier for its social harmony, is facing a wave of anti-social activities and a rise in separatist voices. Recently, a glimpse of the 1960s returned to the state. There were a series of posters and banners across the state, especially in Chennai city, about organising a “Pandri Poonal”, which means “tying the sacred thread (targeted) of Brahmins to pigs”.

A recent local television debate witnessed an ugly caste spat where one of the participants was attacking the upper castes, and a member of that caste who was present in the debate got infuriated. On the other hand, voices of separatist tendencies are gaining ground, though still feeble. In fact, recently, #DravidaNaadu – a hashtag seeking a separate Dravidian state – was trending on social media. At this juncture, it is worth noting that during the end of the famous Marina protest against jallikattu, it was reported that some anti-national elements had entered the protest in a bid to create chaos, which then had to be handled by the state police.

Low political accountability and lower citizen involvement

In the midst of this fiscal management trap, suffering industries, failing education system, an emerging water crisis and signs of social unrest, the political class is caught up in its web of problems. We must bear in mind that in Tamil Nadu, the ruling party is facing its worst ever internal revolt and is broken up into two or three factions, each of which claim to have the support of a handful of Members of Legislative Assembly (MLAs). Resort politics and dhyanam at Amma memorial have become a routine.

What is further worrying is the response of the citizens to this political drama. Cinematic memes have become the order of the day. More worrying are the ever-increasing and ill-informed memes especially targeting the union government and the Prime Minister. For instance, animal market regulation rules were interpreted as a ban on beef consumption, and cinema-based memes made the rounds blaming the Prime Minister for it. The irony was that many who created and delighted in these memes did not realise that cow slaughter was already banned in many states in some form or the other, including Tamil Nadu itself.

Another example was the innovative protest that Tamil Nadu farmers conducted in Jantar Mantar, Delhi. Ill-informed memes started making the rounds that the Prime Minister is not bothered about the plight of the state’s farmers. Little did the meme creators realise that agriculture is a state subject and that the farmers should have ideally protested in front of St Fort George and the chief minister’s house.

All of this makes one wonder as to what has happened to Tamil Nadu – the land of dharma, where legends and greats like Tiruvalluvar and Bharathiyar showed us direction. Once ruled by selfless politicians like Kamarajar and Bhaktavatsalam, today the state is leaderless and is slipping into systematic chaos, and reeling under multiple crises. All this while the politicians are playing musical chairs for power, and citizens are busy creating and enjoying memes.