The interim Budget, presented by Tamil Nadu’s Deputy Chief Minister O. Panneerselvam on Tuesday, ahead of the Assembly election in the State, reflected the significant impact of the COVID-19 pandemic on the State’s finances.
Besides a wider-than-expected revenue deficit and fiscal deficit for 2020-21, the State’s debt is expected to cross ₹5 lakh crore in 2021-22.
The interim Budget was largely devoid of populist announcements, barring schemes providing accident-cum-life insurance cover for 55.67 lakh breadwinners from Below the Poverty Line (BPL) families and enhanced medical insurance cover for government employees.
In aggregate, the State’s Own Tax Revenue (SOTR) was expected to be ₹1,09,968.97 crore in the revised estimates for 2020-21, marking an 18% decline from ₹1,33,530.3 crore in the Budget estimates for 2020-21, Mr. Panneerselvam said while presenting the interim Budget for 2021-22.
The Deputy Chief Minister, who holds the Finance portfolio, noted that the SOTR collapsed in the first four months of the current financial year due to the COVID-19 lockdown and the additional time provided for remitting tax dues.
“The collections of State GST and Value Added Tax started picking up from August 2020. The collections of stamp duty and registration fees have also revived. However, motor vehicle tax collections are yet to fully recover,” he added.
Fall in central tax share
Mr. Panneerselvam pointed out that Tamil Nadu’s share of central taxes was reduced to ₹23,039.46 crore in the Union Budget (revised estimates for 2020-21) from ₹32,849.34 crore in the Budget estimates for 2020-21.
“While the reduction in the share of central taxes is partly attributable to the fall in revenue collection due to COVID-19, the shrinking of the divisible pool of central taxes due to the increase in the share of cesses and surcharges is also a significant factor,” he said.
He reiterated his appeal to the Centre to merge cesses and surcharges with the basic rate of tax.
The interim Budget forecasts an 18% decline in total revenue receipts to ₹1,80,700.62 crore for 2020-21 from the Budget estimates for 2020-21.
The aggregate revenue expenditure as per the revised Budget estimates stands at ₹2,46,694.69 crore, about ₹6,000 crore more than the ₹2,40,992.78 crore projected in the Budget estimates for 2020-21.
“COVID-19 necessitated an additional expenditure of ₹12,917.85 crore on revenue account, primarily for health- and relief-related expenditure. The government incurred an expenditure of ₹13,352.85 crore on the COVID-19 pandemic response,” Mr. Panneerselvam said.
As a result of the sharp deterioration in revenue receipts and the increase in expenditure in the revised estimates for 2020-21, the revenue deficit in 2020-21 is now estimated to be ₹65,994.06 crore — a big increase from the ₹21,617.64 crore projected in the Budget estimates for 2020-21.
Mr. Panneerselvam said that due to the sharp fall in revenue and the rise in expenditure, the government having had to resort to borrowings, resulting in a higher fiscal deficit, was completely unavoidable.
As per the revised Budget estimates, the fiscal deficit is expected to widen to ₹96,889.97 crore in 2020-21, which is 4.99% of the Gross State Domestic Product (GSDP) and within the limits recommended by the 15th Finance Commission.
“Due to the various measures taken by the government to tackle COVID-19, Tamil Nadu is expected to register a positive GSDP growth of 2.02% in 2020-21 (which is based on constant prices in 2020-21), as opposed to a 7.7% negative growth projected at the all-India level,” Mr. Panneerselvam said.
“The strongest performer is the primary sector (agriculture), at 5.23%, with the livestock and fisheries sectors registering even stronger growth. The growth in the secondary sector is 1.25%, and in the services sector, 1.64% in 2020-21. I have no doubt that in 2021-22, the growth will be even stronger,” he added.
A rebound is expected in revenue collections in 2021-22, and SOTR is estimated at ₹1,35,641.78 crore in the interim Budget estimates for 2021-22. The total revenue receipts are estimated at ₹2,18,991.96 crore.
Budgeting for all ongoing salary-, pension-, interest- and scheme-related expenditure, the revenue expenditure is projected at ₹2,60,409.26 crore in the interim Budget estimates for 2021-22.
The overall revenue deficit for 2021-22 is estimated to be ₹41,417.30 crore, while the fiscal deficit is estimated at ₹84,202.39 crore. The projected fiscal deficit is 3.94% of GSDP, which is within the 4% limit set for 2021-22.
The State is estimated to raise net debt of ₹84,686.75 crore to finance the fiscal deficit in 2021-22, as against the overall permissible limit of ₹85,454 crore.
The overall debt outstanding as of March 31, 2021 is estimated at ₹4,85,502 crore, and at ₹5,70,189.29 crore as of March 2022 — well within the norms prescribed by the 15th Finance Commission, Mr. Panneerselvam said.
A provision of ₹5,000 crore was made in the interim Budget estimates 2021-22 for the crop loan waiver scheme.
The Budget also increased the allocation for the revamped Pradhan Mantri Fasal Bima Yojana. The provision for the scheme was stepped up from ₹747.15 crore in the Budget estimates for 2020-21 to ₹812.09 crore in the revised estimates for 2020-21, and further to ₹1,738.81 crore in the interim Budget estimates for 2021-22.
