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Indian Economy and Finances:
A Case Study of Economic Favouritism to Hindi States

P. Ramamurthy

Thanjai Nalankilli

TAMIL TRIBUNE, November 2002 (ID. 2002-11-01)
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OUTLINE

1. Introduction

2. One Example from Year 2002

3. Final Words

1. Introduction

Ever since the British colonial rulers left India, power fell into the hands of Hindi politicians because they form the largest linguistic/regional group in the Indian parliament [Reference 1]. These Hindi politicians systematically transfer wealth from Tamil Nadu and some other non-Hindi state to the Hindi states by way of discriminatory allocation of Indian Government (Central Government) funds to Hindi states [Reference 2]. Complaints from Tamilnadu and the other affected  non-Hindi states and requests for a fairer allocation of funds fall into deaf ears. Thousands of crores of Rupees have been thus transferred out of Tamil Nadu since the 1950s (1 crore = 10 million). Cataloging them all (1950s to the present (2002)) would take several volumes. In this article we present an example from 2002, the current year. Remember, this is just ONE example from 2002.

2. One Example from Year 2002

On March 30, 2002, Indian Prime Minister Atal Behari Vajpayee announced a special economic package to Uttaranchal, a Hindi state. This is at the very same time the non-Hindi speaking State of  Tamil Nadu was in an economic crisis and Tamil Nadu Chief Minister was virtually begging for funds from the Indian Government. While not giving Tamil Nadu even a decent piece of scrap from Indian Government's dinner table, a feast was served to the Hindi State of Uttaranchal. After reading the details, tell us with a straight face if Tamil Nadu (and some other non-Hindi states) are economically discriminated or not.

1. Uttaranchal: The Indian Government gave a special grant of Rupees 550 crores to Uttaranchal for the annual plan and would provide suitable assistance in the next fiscal year also. Please note that this is over and above the usual grants and aid the states receive. It is an established fact that Hindi states receive more than their fair share in grants and aid while most non-Hindi states get less than their fair share. If you don't believe us, will you believe Mr. Ponnaiyan? He stated in the state assembly on April 9, 2002 that Indian Government discriminates against Tamil Nadu in fiscal grants and aid. Who is Ponnaiyan? He is the Finance Minister of Tamil Nadu.

Tamil Nadu: At the very same time that Indian Government was giving this extra largesse to Uttaranchal, Tamil Nadu State was going through a fiscal crisis and was cutting welfare schemes that benefited millions of people in the state; but it was not offered any assistance. In fact, Indian Government cut its funds to Tamil Nadu precipitating the fiscal crunch to the state government. Tamil Nadu's share of tax revenues from the Indian Government was reduced from 6.637% to 5.385%. Indian Government  reduced the grants from Rupees 3367 crores to Rupees 2855 crores resulting in a loss Rupees 512 crores. Furthermore India reduced Tamil Nadu's development grants from Rupees6040 crores to Rupees5225 crores. Tamil Nadu is not alone in this. Number of other non-Hindi states also got their grants reduced while Hindi states saw their grants increased. Non-Hindi state West Bengal's grants were reduced from Rupees 7,111 crores to Rupees5,791 crores; non-Hindi state Karnataka's  grants were reduced from Rupees 8,940 crores to Rupees7482 crores. Also, Indian Government would not pay to Tamil Nadu royalty on Neyveli coal that is legitimately due. This is over Rupees 600 crores. You get the picture. While special grants are given to Uttaranchal, funds are cut to Tamil Nadu at a time it is going through a severe financial crunch warranting postponement or cancellation of some much needed infrastructure development; lack of infrastructure is hurting businesses and increasing unemployment in the state.

2. Uttaranchal: Government of India will give Uttaranchal Rupees 150 crores under the `Rural Infrastructure Development Fund' scheme. Furthermore Rupees 20 crores has been sanctioned for six new schemes in Uttaranchal under the `Integrated Watershed Development Programme'. An additional Rupees 20 crores was granted for the `Rural Sanitation Improvement Programme'. In addition Rupees 20 crores was given for improvement of rural roads.

Tamil Nadu: While Uttaranchal was getting these extra goodies for rural development programs, what did Tamil Nadu get? Nothing, although Tamil Nadu Chief Minister Jayalalitha Jayaram wrote to the Prime Minister in March 2002 that Tamil Nadu needs assistance from the Indian Government because it has one of the highest unemployment rates in rural areas and rural population under poverty level is very high. Tamil Nadu's rural poor and unemployed do not merit consideration in the eyes of Hindi politicians who dominate and control the Indian government.

Tamil Nadu's plan to deepen 40,000 ponds in rural areas had to be shelved because of the declining financial status of the state government. Indian Government did not come to the assistance. Such assistance seems to be reserved for Uttaranchal.

3. Uttaranchal: Indian Government will provide Rupees 5 lakh (500,000 Rupees) to each family affected by the construction of Tehri Dam.

Tamil Nadu: Families affected by the construction of Koodankulam Nuclear Power Plant did not receive any such help from the Indian Government. Why?

4. Uttaranchal: Indian Goverment will fund the development of all lakes in Naini Tal district as major tourist attractions under the `National Lake Conservation Programme'. It also promised funds to develop tourism infrastructure in the four higher Himalayan shrines as a `special circuit' by the State Government.

Tamil Nadu: Tourism is and should be under state jurisdiction. But if the Central Government helps one state government to develop tourism in the state (as it has for Uttaranchal), it should do so for all states without favoritism. Tamil Nadu has many tourist destinations; some are of historical and religious significance, some are spectacular scenic places. Othakamandalam (Ooty or Othakai) is a hill station of scenic beauty. During British colonial rule, British officers used to vacation here during summer because of its mild climate in summer. The Indian Government that is so generous with money to help Uttaranchal develop Naini Tal has not given any money to Tamil Nadu to develop Ooty. Why?

Rameswaram is a temple town in Tamil Nadu. Rameshwaram temple has a long history and many pilgrims in the south visit it. But the outdated rail link to the town is a major problem to pilgrims and tourists. Local people have been asking the Indian Government and government-owned railways to provide broad gauge rail link to Rameswaram for over 30 years, and no action is yet to be taken. While the Indian Government promises funds to develop tourism infrastructure in the four higher Himalayan shrines, the famous temple town of the south does not even have a decent rail link. Is it not discrimination?

5. Uttaranchal: Indian Government will reduce central taxes and central excise duty to attract investments in the industrial sector in Uttaranchal.

Tamil Nadu: It is a well-known fact that ever since the 1950s the Indian Government favored Hindi states and some surrounding areas in setting up central government owned heavy industries. During the past decade of economic reform, public sector gave some way to private sector, and central government's direct control of industries relaxed. Many private companies tended to invest in non-Hindi areas such as southern India because of the availability of more educated and skilled labor. Indian Government that is dominated and controlled by Hindi politicians opened its eyes and saw that Hindi states are not attracting private industry as much. Instead of suggesting to the state governments to develop more skilled labour and a business friendly atmosphere, the Indian Government set out to "artificially" tilt towards Hindi states by fiddling with central government taxes and excise duties. Because of the favorable tax climate private industry would set up factories and offices in Hindi states like Uttaranchal (to the detriment of non-Hindi states). This increases unemployment and decreases living standards in states such as Tamil Nadu, which would otherwise have attracted more industries. (NOTE: In spite of the tax breaks given by the Indian Government to Hindi states, many businesses still locate their factories and offices in Tamilnadu because of the benefits of abundant availability of skilled, educated work force, higher productivity and work ethics in Tamil Nadu. But some factories would be lost because of India's unfair tax policy, thus affecting employment opportunities, salaries and standard of living in Tamil Nadu.) According to some economists, had non-Hindi states like Tamil Nadu be independent countries from the time the British colonial rule ended, these states would have by now achieved a standard of living comparable to Malaysia. 

Indian Government's tax cut in Uttaranchal also reduces the government's tax revenue. Either it should increase the tax on other states to compensate or reduce grants to states. Thus Tamil Nadu gets a second blow on its head because of Indian Government favouritism to Hindi-speaking Uttaranchal.

We point our readers to Reference 3 also. There the author discusses how Indian Government's unfair tax policies affected textile workers and coconut farmers in the southern states of Andhra Pradesh, Kerala and Tamil Nadu. Indian Government textile policies did not affect the large textile companies owned by business families in the north but were targeted on the weavers and small loom workers/owners who are concentrated in non-Hindi areas (specifically Andhra Pradesh and Tamil Nadu). There are over 500000 workers, merchants and small business owners hard hit by it in Tamil Nadu. The situation was so bad that textile workers committed suicide in Andhra Pradesh.

Similarly coconut farms are concentrated in non-Hindi areas (specifically Kerala and Tamil Nadu). In spite of repeated representations, the Indian Government changed the import tax on palm oil thus sending coconut oil prices to unheard of low levels. But some people benefited from this new import tax policy. Who? A few businesses in the Hindi belt [Reference 3].

3. Final Words

When the Indian Government shows favoritism to Hindi states the other states are economically hit adversely. That is the reason for freedom movements (independence movements) in Assom, Nagaland, Mizoram, Punjab, Tamil Nadu, Tripura, etc. Although Tamil Nadu has a skilled and educated workforce and many businesses prefer to set up factories here and Tamil Nadu is a leader in the information technology field, why is Tamil Nadu economy in such a bad shape? Tamil Nadu has a debt of 26 thousand crore Rupees, accrued over the years because of India's step-motherly treatment of India. As we noted earlier "According to some economists, had non-Hindi states like Tamil Nadu be independent countries from the time the British colonial rule ended, these states would have by now achieved a standard of living comparable to Malaysia." Instead of the standard of living comparable to Malaysia Tamil Nadu is today carrying a heavy debt burden and our standard of living is low. The principal reason is that every year thousands of crores of Rupees are systematically transferred from  Tamil Nadu (and Punjab, Andhra Pradesh, Karnataka, Andhra Pradesh, etc.) to Hindi states through the Indian Government controlled by Hindi politicians.

Tamil Nadu and non-Hindi states like Punjab, Andhra Pradesh, etc. are subsidizing Hindi states for some 50 years now. That is too long. It should stop. But there is absolutely no indication of that happening.

REFERENCES

1. Who Rules India? (Part I) (by Thanjai Nalankilli), TAMIL TRIBUNE, November 2000 (44 KB)

2. Archived articles on Economic Discrimination of Tamil Nadu by Indian Government (OR Search the internet with the following key words: economic discrimination Tamil Nadu India )

3. Kerala's Coconut Farmers and Tamil Nadu's Textile Workers are starved to Enrich Hindian Businesses (by Lalitha Krishnan Nair), TAMIL TRIBUNE, July 2001.

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