The time is not yet ripe for fiscal consolidation, and deeper reforms will be undertaken as soon as the impact of the COVID-19 pandemic is overcome, Finance Minister Palanivel Thiaga Rajan said on Friday.
In his maiden Budget speech, Mr. Rajan said deeper reforms would be undertaken to ensure that Tamil Nadu’s debt overhang was corrected without any delay.
Tamil Nadu would be able to avail itself of 0.35% of the 0.5% of the GSDP additional borrowing allocation made for the power sector reforms, without compromising on the free supply of electricity to farmers, and fiscal deficit for 2021-22 at 4.33% of the GSDP would still be within the overall limit prescribed by the 15th Finance Commission. “However, this is not a situation that this government is satisfied with,” he said.
The revenue deficit for 2021-22 is expected to go up from the unrealistic interim budget estimates of ₹41,417.30 crore to ₹58,692.68 crore in the revised budget estimates. “This increase is on account of the exceptional times that we find ourselves in and does not detract in the least from this government’s commitment to fiscal rectitude and consolidation in the coming years, so emphatically indicated in the White Paper,” he said. In the guise of boosting capital expenditure to provide economic stimulus during the COVID-19 pandemic, the AIADMK government had sanctioned several “half-baked and ill-thought-out” projects at the last minute, he said. “We have made a careful analysis of such projects. Only genuinely beneficial projects justified on the basis of a detailed cost-benefit analysis will be implemented.”
The overall capital outlay for the revised budget estimates has been scaled down to ₹42,180.97 crore from the ₹43,170.61 crore provided in the interim budget estimates. “On this basis, the fiscal deficit for the financial year 2021-22 is estimated to be at ₹92,529.43 crore in the revised budget estimates.”
The most critical reform that the State needed to undertake was to increase its tax-GSDP ratio. “The most significant finding in the White Paper is the deterioration of the tax-GSDP ratio of Tamil Nadu by 3.02% from 8.48% in 2006-07 to just 5.46% in 2020-21. In current GSDP terms, this represents a loss of about ₹65,000 crore worth of revenue a year. This is the loss that has to be made up by the State,” Mr. Thiaga Rajan pointed out.
The Minister announced that targeted actions would be taken against tax evasion based on advanced data analytics. “An effective Samadhan Scheme will be launched to clear the pending dues of ₹28,000 crore under the Tamil Nadu Value Added Tax and other legacy legislation.”
The government has been forced to scale down the total revenue receipt estimates from ₹2,18,991.96 crore in the interim budget estimates to ₹2,02,495.89 crore in the revised budget estimates, he said. As against the interim budget estimates of ₹1,35,641.78 crore, the State’s Own Tax Revenue estimates in the revised budget estimates are expected to be ₹1,26,644.15 crore, he said.
Non-tax revenue estimated at ₹14,139.01 crore in the revised budget estimates, which was marginally lower than the interim budget estimates, was on account of the COVID-19 pandemic, he contended.
The total expenditure on the revenue account in the interim budget estimates was pegged at ₹2,60,409.26 crore. “Because of the sudden decision to increase the retirement age to 60, some savings have accrued to the budgeted revenue expenditure. On the other hand, this government has had to incur an additional total expenditure of ₹17,618.80 crore on COVID-19-related relief...,” he pointed out.
In view of the additional provisions made for some important schemes in the revised budget estimates, “...the overall revenue expenditure is expected to be ₹2,61,188.57 crore.” he said.
( The copy of the Minister’s speech can be accessed here https://bit.ly/TNBudgetSpeech)
