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Tag: chandrababu Naidu

  • ‘India is Flying, Not Dead’: EAC-PM Head Backs Modi Capex Push, Warns on Freebie Risks, and Backs Amaravati Growth Engine

    NEW DELHI — Strongly rejecting claims that India is a “dead economy,” Professor Suryadevara Mahendra Dev, Chairman of the Prime Minister’s Economic Advisory Council, stated that calling the nation’s financial state a dead economy on foreign soil is an insult to the country. Pointing to India’s 7.7 percent GDP growth rate as clear proof of resilience, he emphasized that Prime Minister Narendra Modi’s decisive reform measures—ranging from massive infrastructure capex to Atmanirbhar Bharat and deregulation—are driving the world’s fastest-growing major economy. However, he cautioned that states must curb unproductive freebies and balance welfare with development to avoid long-term debt traps.

    In an exclusive interview with Andhra Jyothy Delhi representative A. Krishna Rao, Prof. Mahendra Dev outlined the country’s macroeconomic trajectory, regional growth dynamics, and structural reform imperatives.

    Growth Resilience, Modi’s Reform Push & The Freebie Warning

    Prof. Mahendra Dev highlighted that two key indicators prove ongoing economic momentum: rising investments and expanding exports. India’s investment rate currently stands at 32 percent, but achieving sustained 7 to 8 percent growth requires pushing this to 34 to 35 percent. While global headwinds—COVID-19, the Ukraine war, international tariffs, the Gulf crisis, and 80 percent crude oil import dependence—continue to exert pressure, policy initiatives under PM Modi are actively insulating the economy.

    • Targeted Manufacturing & Self-Reliance: To counter global protectionism, PM Modi’s focus on manufacturing aims for self-reliance in strategic sectors like semiconductors, rare earths, and microchips. Atmanirbhar Bharat is not a return to the pre-1991 License Raj, but a push to build internationally competitive, high-quality domestic products.
    • Ease of Doing Business: Deregulation and the repeal of obsolete laws under the Modi government have streamlined business operations, though execution needs to accelerate at the state level.
    • Fiscal Prudence vs. Unproductive Freebies: Prof. Mahendra Dev cautioned that unproductive freebie schemes damage long-term financial health and drive up government debt. Welfare benefits must be strictly targeted toward eligible, underprivileged sections rather than affluent beneficiaries. Recalling an anecdote, he shared: “A politician once told me he owns 50 acres of land but still received ₹5 lakhs in his bank account under welfare schemes; people like that do not need schemes like Rythu Bharosa, do they?” While debt should be viewed as a ratio to GDP (with the Centre working to bring its debt down to 50 percent of GDP), states must maintain a strict equilibrium between welfare transfers and productive development spending.

    Manufacturing, Labor & Demographic Strength

    Addressing structural bottlenecks, Prof. Mahendra Dev noted that manufacturing remains stuck at 17 percent of GDP and must expand significantly. Women’s workforce participation also needs to rise from 35 percent to 50 percent.

    On national employment, he clarified that government jobs constitute only 15 to 20 percent of total employment. The remaining 80 percent must come from agriculture, the private sector, manufacturing, and services. Job creation has not halted—as manufacturing grows by 17 percent and services by 53 percent, employment expands alongside. Furthermore, India’s demographic average age of 28 years is a major asset that can be transformed into human capital by aligning education with industry-required skills and integrating Artificial Intelligence into agriculture, healthcare, and production.

    Regional Focus: Capital Development in AP & Telangana’s Growth

    When addressing regional development, Prof. Mahendra Dev affirmed that a newly bifurcated state requires a major, single capital city to generate economic momentum.

    • Amaravati & AP Clusters: Just as Hyderabad generates 67 percent of Telangana’s tax revenue due to its scale, developing Amaravati as the capital will create a multi-faceted economic spillover benefiting nearby Guntur, Machilipatnam, and Vijayawada. Dismissing the YSRCP’s three-capitals proposal as meaningless, he noted that Chief Minister Chandrababu Naidu is simultaneously driving cluster-based development across Visakhapatnam, Tirupati, Anantapur, Rajahmundry, Kadapa, and Kurnool. He added that IT Minister Nara Lokesh possesses a complete understanding of this cluster model.
    • Telangana’s Future City: In Telangana, Chief Minister Revanth Reddy expanding Hyderabad under the prestigious “Future City” project is a right decision that will uplift adjoining districts. Since Telangana also faces a debt load, both states should formulate joint economic growth strategies.

    Historical Legacy & Structural Reforms

    Contextualizing India’s development journey, Prof. Mahendra Dev pointed out that for four decades starting from Jawaharlal Nehru’s tenure, India’s growth rate hovered at a low 3.5 percent. During this era, labor-intensive manufacturing, primary health, and primary education were neglected, whereas China and East Asian nations invested heavily in human capital as early as the 1960s.

    Our pace of economic development went off track right from Nehru’s time, leaving structural problems as a historical legacy, while economic reforms were delayed by 15 years—Prof. Mahendra Dev smiled and remarked, “Everyone was a socialist back then, weren’t they?” While many nations reformed in the 1970s, India implemented reforms in the 1990s under P.V. Narasimha Rao.

    Due to these legacy issues, India’s per capita income remains at around $3,000 (compared to China’s $12,000), meaning the economy cannot run like a tiger just yet. However, growth momentum picked up under the Vajpayee government in 2000 and continues strongly under PM Modi, setting the trajectory toward Viksit Bharat—an inclusive, environmentally sustainable, and fully developed economy.

    Biographical Note

    Prof. S. Mahendra Dev, son of the renowned philosopher, writer, and polymath Sanjeev Dev, was born in Tummapudi in Guntur district. He holds a Ph.D. from the Delhi School of Economics and completed post-doctoral research at Yale University. Over a distinguished career, he has held key leadership positions—including Director and Vice-Chancellor of the Indira Gandhi Institute of Development Research (IGIDR) established by the Reserve Bank of India, Chairman of the Commission for Agricultural Costs and Prices (CACP), and Director of the Centre for Economic and Social Studies (CESS) in Hyderabad.

  • Rethinking Tax Devolution in Uneven India

    India’s fiscal federalism is facing a moment of quiet but consequential strain. Chief Minister N. Chandrababu Naidu’s remarks on tax devolution have once again brought to the surface a long-simmering grievance among better-performing states: that they contribute disproportionately to the Union’s tax kitty but receive a shrinking share in return. The data broadly supports this sentiment. A small group of economically advanced states account for the bulk of direct tax and GST collections, while a significant share of tax devolution flows to poorer, high-population states. However, for the country to prosper, all its regions have to prosper, Naidu said in an interview on Sunday with PTI Videos, adding that the states are allies, not enemies.

    Yet, framing this issue simply as “performers versus non-performers” risks obscuring a deeper structural problem. The real question is not whether redistribution is justified—it is—but whether India’s current system of fiscal transfers is equipped to handle the vastly different development trajectories its states have chosen.

    Finance Commissions are constitutionally mandated to address horizontal imbalances among states. Inevitably, this means that poorer states such as Uttar Pradesh, Bihar, and Madhya Pradesh receive a larger share of devolved taxes.Poorer states like UP, Bihar and MP received 36% of the tax  meant for sharing with the states. Against this, these three states contributed only 5% of the total direct tax and Central GST collected by the Centre during that period. This is neither accidental nor malicious; it reflects the principle that citizens should have access to comparable public services regardless of where they live. From this perspective, redistribution is not a penalty on success but a cornerstone of national unity.

    However, this logic begins to fray when redistribution appears perpetual and weakly linked to outcomes. Southern and western states that invested early in education, health, and population control now find themselves disadvantaged by formulae that give significant weight to population size and income distance. Their success in managing fertility and building human capital—once seen as national assets—now translates into lower relative shares. This creates a perverse incentive structure and a growing political resentment.

    Complicating matters further is the Centre’s increasing reliance on cesses and surcharges, which lie outside the divisible pool. While the official share of states stands at 41 per cent of Union taxes, the effective share is considerably lower. States are being asked to shoulder expanding responsibilities—especially in health, education, and infrastructure—without commensurate fiscal space. It is unsurprising, then, that demands are growing to raise the states’ share to 50 per cent.

    Yet, linking devolution directly to tax contribution alone would be equally problematic. Tax collections reflect not just effort but historical advantages, agglomeration effects, and the location of corporate headquarters. A purely contribution-based system would risk locking poorer states into a low-development trap, undermining both equity and long-term national growth.

    The way forward lies in recognising that India is attempting to achieve too many objectives with a single instrument. Tax devolution is being asked to equalise, incentivise, and reward all at once—and predictably, it satisfies none fully.

    A more mature framework would separate these goals. A core equalisation transfer should continue to ensure minimum fiscal capacity for all states. Alongside this, a distinct performance-oriented component could reward states for expanding the national economic pie—through growth, tax effort, infrastructure creation, demographic management, and human capital outcomes. Such a structure would acknowledge both need and contribution without pitting one against the other.

    Equally important is addressing sectoral imbalances. States like Kerala, which prioritised social development, now face infrastructure constraints. Others, like Gujarat, built strong physical infrastructure but lag in social indicators. Poorer states struggle on both fronts. A dedicated, outcome-linked national infrastructure fund—outside routine tax devolution—could help bridge these gaps without distorting the principles of redistribution.

    India’s diversity in development paths is a strength, not a flaw. But managing that diversity requires fiscal institutions that are transparent, differentiated, and forward-looking. Unless redistribution is paired with clear incentives and a fair sharing of resources, political “heartburn” will only intensify.

    The choice before India is not between rewarding success and supporting the vulnerable. It is about designing a federal compact that does both—openly, credibly, and sustainably.