Financial experts say the continuing revenue deficit would be a key concern viewed particularly in the context of the upcoming pay revision.
In the budget presented on Thursday, the State government estimated that it would have a revenue deficit in the next four years from 2016-17 to 2019-2020.
The major reason for this is the fact that the State has been revising its revenue expectation downwards for the last few years.
Tamil Nadu Finance Secretary Shanmugam pointed out that tax collection on petroleum products has stagnated at ₹10,000 crore in the last four years, and hence, the increase in VAT rates for fuel was necessary. He also said motor vehicle tax had seen improvement and the only challenge had been the fall in stamp duty collections.
According to him, the State has to receive ₹6,000 crore for various schemes sponsored by the Centre.
‘Will hit borrowings’
“Tamil Nadu continues to show substantial revenue deficits, which will disallow the State from availing additional borrowing.
“However, the projected fiscal deficit and borrowings remain well within the norms. Going forward, the pay revision, which is likely to be implemented from 2018-19, will exert pressure on revenue expenditure,” said Jayanta Roy, senior vice president, ICRA Ltd.
Devendra Pant, chief economist and head, Public Finance, India Ratings and Research, noted that the fiscal deficit has breached the norms due to Tamil Nadu joining the UDAY scheme and this was the case for many States.
