Tamil Nadu

Tamil Nadu Budget 2020-21: Net debt to rise, revenue deficit set to double

Deputy Chief Minister and Finance Minister O. Panneerselvam with Tamil Nadu Chief Minister Edappadi K. Palaniswami before presenting the budget for 2020-21 in the State Assembly

Deputy Chief Minister and Finance Minister O. Panneerselvam with Tamil Nadu Chief Minister Edappadi K. Palaniswami before presenting the budget for 2020-21 in the State Assembly   | Photo Credit: B. Jothi Ramalingam

UDAY scheme, slower growth in tax revenue drag finances.

Tamil Nadu’s net outstanding debt is expected to rise significantly to over ₹4.56-lakh crore in 2020-21, from ₹3.97-lakh crore projected in 2019-20. The State’s revenue deficit too is set to double compared to the previous projection owing to a host of factors, Deputy Chief Minister and State Finance Minister O. Paneerselvam said, presenting the budget in the Assembly on Friday.

The State’s revenue deficit is likely to double to ₹21, 617.64 crore compared to the projection of ₹10,040.31 crore for the year. However, compared to the revised estimates for 2019-20 it is lower by nearly ₹ 4,000 crore. Even for 2019-20, the revenue deficit is now projected at ₹25,000 crore, an increase of ₹10,000 crore from the earlier estimate, largely due to an “unprecedented” drop of ₹7,586 crore in the State’s share of Central taxes”.

In a budget speech lasting over three hours, Mr. Paneerselvam said the State continued to see a sustained increase in its revenue deficit.

The burden imposed on the State finances by the takeover of debt of Tangedco under the UDAY scheme, the lag effect of the implementation of the 7th Pay Commission and slower growth in tax revenue were the primary reasons for the increase in the revenue deficit.

The rise in the net debt was mainly on account of the State raising ₹59,209.30 crore as net debt to finance the fiscal deficit during 2020-21. The fiscal deficit is estimated to be 2.84% for 2020-21, well below the 3% fiscal norms.

Tamil Nadu Budget 2020-21: Net debt to rise, revenue deficit set to double
 

The State’s Own Tax Revenue is estimated to increase to ₹1.33 lakh crore for the year, compared to the revised estimate of ₹1.20 lakh crore for 2019-20.

Finance Secretary S. Krishnan said the 2020-21 budget was prepared taking into to all these factors and has projected just a conservative estimate of growth of 10.5% in tax revenue.

On the State’s debt crossing more than ₹ 4.5 lakh crore (21.83% of GSDP), he said it was well within the permissible limit of 25%. On the continuing trend of the State posting a revenue deficit, Mr. Krishnan said it was because Tamil Nadu spent more on welfare schemes compared to other States, adding that over time this deficit would be brought down.

Revenue expenditure is estimated at about ₹2.41 lakh crore for 2020-21, compared to ₹2.12 crore lakh crore in the revised budget estimate for 2019-20.

Growth lags 

Tamil Nadu’s economic growth for 2019-20 is projected to be 7.27%, a fall from 8.17% in 2018-19, Mr Panneerselvam said, attributing it to global and national economic headwinds. However, the State’s growth was higher than the national growth rate of 5%, he said, adding that he expected an even stronger growth performance in the coming year.

The economic slowdown has also hit the State’s tax collection in 2019-20. For instance, collection of taxes on motor vehicles dipped to ₹6,018.63 crore in revised estimates for 2019-20 when compared to previous projections of ₹6,510.70 crore.

“Since motor vehicle tax is primarily levied on registration of vehicles, tax collections in the coming years is expected to be in accordance with improved economic growth prospects,” he said. The impact of the exemption for electric vehicles, more of which are expected to be registered, have also been factored in.

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Printable version | Feb 25, 2020 6:11:31 AM | https://www.thehindu.com/news/national/tamil-nadu/tn-budget-2020-21-economic-growth-likely-to-dip-on-global-and-national-economic-headwinds/article30818599.ece

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