Does hair tonic encourage hair growth?

Dimethicone is an ingredient that is often found in emollients and barrier creams. It is used as a moisturize and barrier cream and is useful in preventing diaper rashes and protect the skin from irritants. Dimethicone is generally very safe and well tolerated when applied to the skin. It can occasionally cause some redness and stinging of the skin but this is an uncommon side effect.

The photo is not so clear, but it appears that you may have used too much topical steroids on that patch of skin. This can result in skin thinning (atrophy) and hair growth. You should stop using any topical steroid creams, and use regular moisturisers. I’d strongly suggest seeing a dermatologist to confirm the diagnosis.