V. Jayanth

"Enhanced tax receipts, reduction in revenue expenditure, better debt management"

CHENNAI: "The State continues to outperform the targets fixed under the Medium Term Fiscal Plan owing to enhanced tax receipts, reduction in the pace of growth of revenue expenditure and better management of debt. The fiscal space thus created has resulted in an unprecedented increase in the capital outlay. The total capital expenditure is estimated at Rs. 5,334.54 crore in the interim budget estimates [for] 2006-07. This will be an increase of 345 per cent over the capital expenditure during 2000-01."

That is the sum and substance of the State Government's fiscal report tabled in the Assembly on Friday by Finance Minister C. Ponnaiyan, as required under the Tamil Nadu Fiscal Responsibility Act 2003.

Mr. Ponnaiyan said: "Fiscal correction envisaged in the Medium Term Fiscal Plan lays emphasis on fiscal consolidation with improving the quality of expenditure by increasing the capital outlay, providing sufficient provision for maintenance of assets as per the Twelfth Finance Commission guidelines and increasing the social sector outlay.

Capital expenditure as a percentage of the Gross State Domestic Product (GSDP) was at 1.05 per cent in 2002-03. It is proposed to increase this ratio to 2.3 per cent in the interim budget estimates 2006-07.

With the near elimination of revenue deficit, the entire fiscal deficit will be only on account of financing the capital expenditure."

Officials explain that this has been possible with two-pronged strategy - containing revenue expenditure and borrowings on one side, and increasing the revenue collections on the other, leading to an enhanced capital outlay. After pruning the annual plan in the first year of the present Government, there has been no turning back.

The State has envisaged a plan outlay of Rs. 11,709 crore. The brighter side of the picture emerges from the buoyancy in revenue collections.

The growth in sales tax collections for the current year has been estimated at 15 per cent over 2004-05, which may be rather conservative. If the Government has been able to provide so much cushion for the chain of concessions and compensation packages unveiled in the recent months, it is because the economy is on the upswing and tax collections are buoyant.

Tamil Nadu already enjoys the distinction of having the highest tax GSDP ratio in the country.

The ratio of the State's own tax revenues to the GSDP has touched 10.5 per cent in the revised estimates for 2005-06, though there have been no new taxes in the budgets for the past three years.

It was because of the "rosy economic and fiscal scenario" that Chief Minister Jayalalithaa was able to announce a slew of concessions and schemes on Friday, a few hours before the interim budget was presented to the Assembly.

It is also an election-eve budget and a vote on account.