By releasing a white paper on state finances, the DMK-led government of Tamil Nadu attacked the previous AIDAMK regime on Monday, claiming that the worsening budget deficit had made the state too dependent on debt.
According to the provisional budget estimate (BIE) for 2021-2022, the overall government debt will be 5,70,189 crore de. Its public debt (excluding debt of the Center) as a percentage of the GSDP is 26.69%, which is above the limit of 25% authorized by the 14th Finance Committee, said Palanivel Thiaga Rajan, Minister of Finance of Tamil Nadu. , to the media. This effectively means that every family in the state is in debt 2,63,976, he said.
He said that even though the outstanding government debt was mentioned as Rs 4.85,503 crore as of March 31, 2021 (RE), in the IBE, “considering the ‘other means’ of financing the budget deficit, the real debt is 5,24,574 crore rupees, which is equivalent to the total budget deficits over five years ”.
The budget deficit financed by “other means” for the period 2016-21 was 12.68% of the total budget deficit, and in real terms it stands at 39,071 crore, the minister said. Particularly over the past three years, the amounts taken from the public account to manage the budget deficit have been greater than 10% of the budget deficit in proportion, according to the white paper.
TN’s revenue deficit has deteriorated over the past eight years. Such a long-term trend affected capital investments, which in turn affected growth. In five of the seven years between 2006-13, TN had a net income surplus. However, it has been a chronic revenue deficit state since 2013. The average revenue deficit for all states and Union territories was 0.1% of GDP in 2019-2020 and 2020-2021; for Tamil Nadu, it was 1.5% and 1.4% of the GSDP, respectively.
Analysts, however, said that the fiscal position of almost all states and the Center has deteriorated in recent years due to weaker economic growth and declining income buoyancy, and that the situation became more serious after the pandemic.
According to the Minister of Finance, the state budget deficit has increased mainly due to the increase in the revenue deficit, not the increase in capital investment. For 2018-19 and 2019-20, the budget deficit was 2.90% and 3.26% of MSRP respectively. The authorized limit as a ratio of the GSDP is 3%. The government of Tamil Nadu has violated this limit continuously for the past eight years, he said.
Government guarantees outstanding for the 2020-21 fiscal year were 91,818 crore. A higher amount of government guarantees will result in a low government credit rating, which will result in more expensive credit. This represents 4.72% of the GSDP, the third highest in the country behind Andhra Pradesh and Telangana, the minister said.
About 91% of government guarantees from the government of Tamil Nadu are due to borrowings in the electricity and transport sectors, and the government runs the risk of increasing its debt burden if the PSUs are not repaid.
Total government revenue declined to 8.7% of GSDP in 2020-2021 from the peak of 13.35% of GSDP in 2008-09. Subsequently, the State’s own tax revenues (SOTR) fell significantly. The growth rate of total revenue has declined significantly from 11.4% of MSRP in 2006-11 to 3.80% between 2016-19.
SOTR accounted for almost 70% of total turnover until 2013-14. The proportion of SOTR to total revenue then decreased to 62.82% in 2020-2021.
Describing the main areas of intervention towards recovery, the finance minister said strong measurement and monitoring of performance indicators will be the priority. The government will encourage the participation of all stakeholders in the decision-making process. It will try to reduce the debt burden as soon as possible while freeing up unused value potential to increase income equitably with as little coercion as possible.