Staring at a fiscal deficit of ₹44,176 crore, Deputy Chief Minister and Finance Minister O. Panneerselvam has shied away from unveiling a populist Budget in an election year.
The Budget presented by him on Friday focussed more on tightening the finances. The fiscal deficit will be 2.56% of the Gross State Domestic Product, below the threshold of 3% mandated by the Fiscal Responsibility Budget Management (FRBM) Act norms, he said.
Mr. Panneerselvam told the Assembly that the fiscal consolidation would be achieved by limiting borrowings to a level below the ceiling fixed by the Central government and an expected increase in the State’s Own Tax Revenues (SOTR), thereby bringing down the revenue deficit.
ADVERTISEMENT
Tangedco’s debt
While stopping short of announcing any large-scale sops for citizens, a bulk of the budgetary allocation has been allotted for infrastructure development, agriculture, school education, highways, energy and health sectors. The Finance Minister blamed factors such as taking over of Tangedco’s debt by the Tamil Nadu government under the UDAY scheme, implementation of the 7th Pay Commission, continuing reduction in its share of Central taxes and slower growth in SOTR in the past few years, among reasons for the widening revenue deficit. The SOTR is estimated to grow 13.28% in 2019-20 to ₹1,24,813.06 crore from the revised estimate for 2018-19 of ₹1,10,178.43 crore. “The shocks of pay revision are getting phased out and steps being taken for fiscal consolidation,” he said.The allocation for salary and pensions is to the tune of over ₹85,000 crore for 2019-20, accounting for 40.1% of the State’s revenue expenditure of ₹2,12,035.93 crore.
The State will again post a revenue deficit of ₹ 14,314.76 crore in 2019-20. However, it is forecast to be lower by a little over ₹5,000 crore from the revised estimate of previous year due to improved tax revenues and reduced borrowings, according to K. Shanmugam, Additional Chief Secretary to Government, Finance Department.
ADVERTISEMENT
“The revenue in 2018-19 has shown a good improvement from last year and we expect the trend to continue,” Mr. Shanmugam said.
“So our focus has been on fiscal consolidation, by reducing the borrowings and interest payments in a phased manner,” Mr. Shanmugam said. He also added that the State has made a cautious and moderate projections in revenue collections.
₹4 lakh crore debt
The State aims to borrow only up to ₹43,000 crore against the ceiling of ₹51,800 crore in 2019-20. Last year, it had borrowed ₹47,350 crore.
“The outstanding debt including provident fund will be ₹3,97,495.96 crore, constituting only 23.02% of GSDP in 2019-20, which will be below the threshold of 25%,” Mr. Panneerselvam said.
For instance, SOTR is expected to grow only 13.28% in 2019-20, compared to 17.54% last year. “Last year, higher fuel prices helped the State garner more tax revenue from petrol and diesel. We don’t expect that to continue this year,” Mr. Shanmugam said.