: Several economists have expressed concerns over the ballooning revenue and fiscal deficits in Tamil Nadu and said that the situation would give little room for spending on key thrust areas.
In the revised budget 2016-17, the government forecast a revenue deficit of Rs. 15,854.47 crore, its fourth straight year of revenue deficit. The fiscal deficit has been estimated at Rs. 40,533.84 crore, which is 2.96 per cent of Gross State Domestic Product (GSDP).
Revenue expenditure has been increased to Rs. 1,64,029.56 crore, from the interim budget forecast of Rs. 1,61,159.01 crore.
“The lower revenue and higher expenditure forecast relative to the interim budget is a cause for concern as it is estimated to widen the state’s revenue deficit,” said Jayanta Roy, senior vice president at ratings firm ICRA Ltd.
One of the reasons for this has been the falling tax collections on account of petroleum products and a slowdown in economy.
Tamil Nadu Finance Secretary Shanmugam pointed out that tax collection on petroleum products have stagnated at Rs. 10,000 crore in the last three years and registered a negative growth in 2015-16.He added that the sectors which bring in substantial amount of tax in the State like cement, steel, electrical goods and automobiles have been hurt by the economic slowdown.
“The state finances are affected by increasing committed expenditure on four key items – salaries, pension, subsidies and interest – which alone account for 93.8 per cent of revenue expenditure.
This leaves very little funding for operations, maintenance and other schemes. The revenue expenditure on these four sub-heads alone is budgeted at 110.7 per cent of the FY17 revenue receipts,” says Devendra Pant, chief economist and head, Public Finance, India Ratings and Research.
“The government’s FY17 revenue and fiscal deficit is pegged at 1.16 per cent and 2.96 per cent of GSDP respectively. While the fiscal deficit-GSDP ratio is within the regulatory limits, revenue deficit is breaching these limits and continuous revenue deficits are a cause of concern,” he adds.
According to Mr. Pant, the key positives are a relatively better GSDP growth of 8.79 per cent in FY16 versus the GDP growth of 7.6 per cent.
The state’s debt-GSDP ratio of 21.2 per cent according to the RBI is the sixth lowest among the non-special category states after Chhattisgarh, Odisha, Maharashtra, Madhya Pradesh and Jharkhand) compared to the average of 22 per cent reported for other states.
Finances strained by rising expenditure on 4 items: salaries, pension, subsidies and interest
