CHENNAI: Presenting his tenth budget in a pre-election year, Tamil Nadu Deputy Chief Minister and Finance Minister O. Panneerselvam appears to have managed a sleight of hand exercise, maintaining the growth thrust, amid rising overall fiscal deficit, sharp cuts in Central finances and a steep slide in revenue receipts in the current fiscal 2019-20.
“Despite the many fiscal constraints, Tamil Nadu remains steadfast in adhering to fiscal discipline and has maintained key fiscal ratios including the fiscal deficit and the debt to GSDP (gross state domestic product) ratio within the prescribed limits,” Mr Panneerselvam said presenting his 130-page Budget for 2020-21 in the Legislative Assembly on Friday.
While enhancing outlays in the capital account to maintain the tempo of economic development by providing Rs 36,367.78 crore in the BE for 2020-21, as against Rs 31,220.89 crore in the revised estimates for 2019-20 towards capital expenditure, he said the overall fiscal deficit for the coming year would be a whopping Rs 59,346. 29 crore, against Rs 55,058.39 crore in the RE for 2019-20. However, the overall fiscal deficit at 2.84 per cent of GSDP is within the statutory limit, he underscored.
To cover this huge fiscal deficit in the coming year, Mr Panneerselvam has planned to raise the state’s borrowings up to a level of Rs 59,209.30 crore, against the overall borrowing limit of `62,757.80 crore. The ‘net outstanding debt’ at the end of March 31, 2021, is expected to be Rs 4,56,660.99 crore.
Proposing to cover most of the additional capital expenditure through increased market borrowings, the Finance minister takes shelter in the fact that Tamil Nadu’s debt to GSDP ratio is 21.83 per cent, still within the norm of 25 per cent.
The State’s GSDP (gross state domestic product) for 2019-20 has been projected at 7.27 per cent, above the national average.
Mr Panneerselvam said this shows the “resilience of the State economy to shocks’ despite the Indian economy facing a slowdown and the country’s growth rate pegged at five per cent.
Slower tax revenue growth worries TN
“Tamil Nadu’s resilience has been enabled by the diversification of the economy and sustainable policy initiatives” of the Edappadi K. Palaniswami-led Government, inspired by the vision of late Chief Minister J. Jayalilathaa, and constantly liaising with the Centre, the Finance minister underscored.
The burden of the state's finances continues to be on account of the massive debt taken over by state power utility Tangedco, its mounting losses “lag effect” in implementation of 7th Central Pay Commission, and slower growth in tax revenues, besides constant increase in salaries and pensions.
Tamil Nadu is somewhat cheered by “modest increase” in the state's share based on the recommendations of the 15th Finance Commission, which submitted its interim report to the Centre recently, with share of Central taxes for 2020-21 pegged at Rs 32,849 crore and grants-in-aid projected at Rs 37,096.69 crore.
But the overall mood of central devolution is one of disappointment, with Mr. Panneerselvam bemoaning that apart from Rs 4,073 crore due to Tamil Nadu from Integrated Goods and Services Tax (IGST) for the year 2017-18 yet to be settled, “there is a large and unprecedented reduction in Tamil Nadu's share of Central taxes received as devolution in the R.E. 2019-20”. As much as Rs 7,600 crore is the drop faced by the State with Central taxes cut to Rs 26,392.40 crore.
Mr. Panneerselvam also takes comfort that the shortfall has been made up to 'some extent', thanks to higher collection of non-tax revenue and by way of grants-in-aid from the Central government for various schemes and projects....