Tamil Nadu Budget 2018-19: State expects revenue deficit of Rs 174.90 bn

Finance Minister and Deputy CM O Panneerselvam says Tamil Nadu's economic growth would surpass 9% in 2017-18

Tamil Nadu Deputy Chief Minister and Finance Minister O Panneerselvam said the state’s total Revenue Receipts (TRR) had been projected at Rs 1558.25 billion in the revised estimates 2017-18, the revenue expenditure was estimated to be Rs 1,741.95 billion, leaving the revenue deficit at Rs 174.90 billion.

The state of Tamil Nadu's revenue deficit in 2018-19 is expected to be around Rs 174.90 billion. The two major reasons are implementation of UDAY scheme and pay panel recommendations amidst these financially challenging times, says Panneerselvam.

The state, which had been opposing the goods and services tax (GST) earlier, is now saying that the Centre's new reform is helping it.

In his budget speech, Panneerselvam said the Union Government would compensate the states for any loss of revenues on account of the GST implementation, for the first five years. During the period from July 2017 to February 2018, the state had received Rs 6.32 billion as GST compensation from the Centre.

"I am confident that our state will gain from GST in due course, since the gap between the projected revenue with 14 per cent growth rate and actual revenue has been shrinking considerably over these eight months," said Paneerselvam.

He added the pace of economic growth in the state had picked up in 2017-18 and would continue to improve in 2018-19.

The Gross State Domestic Product of Tamil Nadu in the real terms is expected to grow at 8.03 per cent in 2017-18.

As the economic outlook of the state is favourable, the sustained investments made by the government in the primary sector and the measures taken for invigorating industrial investments in the state could drive the economic growth further to surpass nine per cent in 2018-19, said Paneerselvam.

Even as Panneerselvam presented the state Budget, Opposition members appeared in black shirts, protesting the state government’s laxity in pushing the Centre to set up the Cauvery Management Board. 

The revenue expenditure during 2018-19 is estimated at Rs 1.93742 trillion, up by 11.22 per cent over revised estimate of 2017-18 mainly due to pensions and other retirement benefits.

The Budget document shows allocation for salaries is Rs 521.71 billion and the for pensions and other retirement benefits is Rs 25,362 crore in Budget Estimates for 2018-19.

There has been a substantial increase in salaries and pension components in the Revised Estimates for 2017-18 and the Budget Estimates for 2018-19, owing to the implementation fo the 7th Pay Commission recommendations.

Annual deficit of Tamil Nadu has been growing by 20 per cent in the past four years and the revenue income through liquor, excise, registration and motor vehicles tax has been stagnant.

S Mahalingam, chairman of economic affairs and GST sub-committee of CII Southern Region, and Abdul Majeed, partner at PricewaterhouseCoopers, wrote in a column that Tamil Nadu’s current share in India’s GDP was about 8 per cent, making it one of the leaders. The question now was whether Tamil Nadu could continue to be a leading state with this type of financial management.

They added, if one looked at both the inflows and outflows in the revenue budget, there was a potential bonanza that might come to the help of the state in its revenues from GST, as it is not just a manufacturing but also a major consuming state.

However, the gains from this will be taken away from the impact of the 7th Pay Commission award, expected to be of the order of Rs 147.19 billion. Tamil Nadu has to move towards the elimination of its revenue deficit and that could come about mainly through improving revenue inflow.

This is the first Budget of the Tamil Nadu government after last year's merger of the two factions of the All India Anna Dravida Munnetra Kazhagam (AIADMK) – one each led by Panneerselvam and Chief Minister K Palaniswami. Earlier, the ruling party had split into three after the demise of AIADMK supermo and former chief minister J Jayalalithaa. But two of the camps came together last August, and eased out the third faction – jailed leader V K Sasikala and her kin, including her nephew T T V Dhinakaran – from the party.