Tamil Nadu

Tamil Nadu fiscal deficit is within norms: official

Finance Secretary S. Krishnan (right) briefing the press about the 2020 Tamil Nadu budget at the Secretariat, Chennai, on February 14.

Finance Secretary S. Krishnan (right) briefing the press about the 2020 Tamil Nadu budget at the Secretariat, Chennai, on February 14.   | Photo Credit: B. JOTHI RAMALINGAM

But Finance Secretary says it must be kept under control

The Tamil Nadu government is maintaining debt sustainability, which is reflected by its performance in certain fiscal indicators. But this does not mean that it can be a profligate dispensation, according to S. Krishnan, Additional Chief Secretary (Finance).

“Our fiscal deficit (FD) is within the norm of 3% of our Gross State Domestic Product (GSDP). We will have to keep it under control as we are close to the edge. It is a tightrope balance. At the same time, our [State’s Own Tax Revenue - SOTR] tax-GSDP ratio must improve. Local bodies have to increase their revenue,” Mr. Krishnan told The Hindu on Saturday, responding to questions on the issue of borrowings.

Tamil Nadu fiscal deficit is within norms: official

In 2018-19, the ratio of FD-GSDP was 2.84%. In 2019-20, it would be 2.97%, as per revised estimates. For the year 2020-21, the government projected the figure of 2.84%.

Revised estimates

Likewise, the SOTR-GSDP ratio, which was 6.34% in 2018-19, was expected to be 6.51% as per revised estimates and 6.38% as per budget estimates.

Refuting the criticism in certain quarters that the government was borrowing only to meet the cost of subsidies, he said a majority of the borrowings went for capital expenditure. For the coming year, the government planned to borrow about ₹59,000 crore, of which around ₹36,400 crore had been earmarked for capital expenditure. Only the rest would be used to reduce revenue deficit.

Pointing out that one had to examine the factors that contributed to revenue deficit closely, he said that “the State government’s investment is essentially on human capital, which is considered revenue expenditure. Apart from investing in capital construction, the government spends on education and health care. We believe that what we spend today will pay us back later in terms of higher growth because we will have a more educated population.”

It was in this context that Mr. Krishnan described as specious, the classification between revenue expenditure and capital expenditure.

Acknowledging that he would not like revenue deficit or the rise in the proportion of debt in GSDP, he, however, said that it was important to keep them all within the prescribed norms. “The government can afford an increase in debt which is in line with overall growth rate of the State’s economy,” he added.

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Printable version | Jul 7, 2020 6:24:30 PM | https://www.thehindu.com/news/national/tamil-nadu/tamil-nadu-fiscal-deficit-is-within-norms-official/article30832328.ece

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