The maiden budget presented by Finance Minister D. Jayakumar on Thursday clearly indicated that Tamil Nadu’s finances are in distress.
The State’s fiscal deficit has breached the Fiscal Responsibility Budget Management (FRBM) Act norms in 2016-17 at 4.58% of the Gross State Domestic Product (GSDP). The FRBM Act prescribes a fiscal deficit threshold of 3% of GSDP (Gross State Domestic Product). In essence, the State’s expenses were higher than its revenues excluding its borrowings. This higher spending was on account of the State joining the UDAY scheme and taking over about 75% of Tangedco’s debt amounting to ₹22,815 crore. “Excluding the debt takeover, the fiscal deficit in 2016-17 will be 2.88% of the GSDP,” Mr. Jayakumar said. But he termed the breach “temporary”.
Tax revenue dips
To add to this, the State’s Own Tax revenue growth rate declined significantly. “The low economic growth, demonetisation and the ban on registration of property in unapproved layouts have dented the receipt from stamp duty and registration charges severely,” he added.
The government expects to collect tax of ₹87,287 crore, 25% lower than its earlier expectation of ₹1,09815 crore for 2016-17. However, the State’s own tax revenue is expected to increase to ₹99, 590 crore in the budget estimates for 2017-18.
Budget estimates for 2017-18 peg fiscal deficit at 2.79% of the GSDP. It is likely to be an uphill task for the government as it stares at another large expense coming its way — payments under the Seventh Pay Commission.
