Implementation of GST and the Chennai Floods.
Tamil Nadu has long portrayed itseld as the Indian hub for manufacturing, especially to Auto majors, and was attractive on the back of three aspects:
- Lucky Geography: Long coastline, relatively flat terrain meaning good infrastructure and connectivity
- A relatively efficient bureaucracy, even amidst constant shuffling and election agenda.
- Large urban population- probably due to lack of perennial rivers or failure of agriculture in most parts of the state.
All three aspects, incidentally, failed during the recent floods. It has greatly damaged the state’s reputation, and affected its negotiating position with investors vis a vis other states like Karnataka, Maharashtra or Gujarat. In this scenario, the implementation of G.S.T at this juncture becomes detrimental to the state on a 5 year horizon.
The floods have meant that Tamil Nadu will experience probably low single digit growth in GSDP, if at all. Investments are likely to be deferred indefinitely. Which means the state is entering a period of difficulty, economically. For a state reeling under financial duress, the floods and relief measures will add further stress on the coffers.
Modi was dependent on his good rapport with Jayalalitha to garner A.D.M.K’s support in event of a joint sitting of the houses to implement GST from April 1, 2016. Though he might still do without her support, he will not be willing to leave things to chance. TN would have a loss in revenue on implementation of GST, being a net exporter to other states. He would have been willing to cede some ground in terms of revenue compensation.
The Floods will push the ADMK leader to the negotiating table in a disadvantage. She would now rather secure relief funds than revenue compensation that would aid a future government, quite possibly not hers. The relief funds would also come with no strings or timelines, which are to her advantage, but not to the people.
The implementation of GST immediately will greatly disadvantage the TN Government that comes to power in 2016. Lower revenues and capital investment in infrastructure means they may need to come up with a miracle of the Chinese variety.