The Tamil Nadu government’s finances, especially the collections through the State Own Tax Revenue (SOTR), appear to be on the path of recovery, if the pattern of revenue generation in the last two months is any indication.
The collections through the SOTR, constituting around 60% of the overall revenue receipts, turned positive in September and October. The rate of growth was around 7% in September; the figure for October, too, was in the positive, though it has not yet been finalised, says a senior official. In July too, the SOTR growth rate was around 6%, but the revenue included the settlement by the Centre of the arrears due for March and the subsequent months.
The State’s finances had taken a blow after the lockdown was imposed soon after the COVID-19 pandemic broke out in late March. This was illustrated by the growth of the SOTR collections. In April, the growth rate was -76% compared with the corresponding month in 2019; in May, -60% and in June, -18%. In August too, the rate was in the negative with about -21%. The growth rate for the first half of 2020-21 (April to September) over the corresponding period of 2019 was -26.71%
When the pandemic started, the government expected that the SOTR at the end of the current financial year would be short by around ₹35,000 crore, which would have been 25% of the originally estimated figure of collections. But the developments in the recent months have given room for hope that the fall will be around 15%, the official points out.
Apart from the indications of recovery, the saving grace in the first half of the current year was that the State received around ₹3,000 crore more from the Centre under the component of ‘grants in aid’ than what it got in the same period of 2019. However, in the coming months, such a flow may not be there. In that case, the State has to rely on its own sources.
The present calculations of revenue collections may have to be revised in the event of another wave of infections, the official cautions, hoping that such an eventuality would not arise.
