Tamil Nadu budget: Fiscal deficit seen at 4.3% of GSDP; tax on petrol cut

State allocates Rs 32,560 cr for education; lines up medium term fiscal plan to tide over rising debt

Tamil Nadu’s fiscal deficit for financial year 2021-22 was estimated at Rs 92,529 crore in the revised Budget Estimates 2021-22, which will be 4.33 per cent of the Gross State Domestic Product (GSDP).

In a huge relief to fuel consumers, Tamil Nadu finance minister P T R Palanivel Thiagarajan announced on Friday that the state will cut petrol price by Rs 3 per litre by reducing taxes on the fuel, which will result in a loss Rs 1,160 crore on revenue for the state exchequer. In Chennai, petrol is priced at Rs 102.49 a litre before the price cut.

The state's fiscal deficit was Rs 96,889.97 crore, which was 5 per cent of its GSDP in the revised budget for 2020-21. This revised fiscal deficit was within the norms prescribed by the norms prescribed by the 15th Finance Commission. The finance minister said that the state's revenue for the fiscal year is estimated at Rs 2,02,496 crore, while expenditure is estimated at Rs 2,61,189 crore. The budget has set an ambitious target of lowering the revenue deficit to Rs 58,692 crore which is lower than the figure in 2019-20 and less than 60 per cent of the revised revenue deficit estimate for 2020-21. Thiagarajan indicated that as soon as the pandemic effect is over, the state may opt for deeper reforms.

To tide over the rising debt, the state also lined up a Medium Term Fiscal Plan (MTFP) that set a roadmap of keeping fiscal deficit to GSDP within 4 per cent in 2021-22, at 3.5 per cent in 2022-23 and 3 per cent from 2023-24. MTFP also lines up an additional borrowing of 0.5 per cent of GSDP for a period of four years from 2021-22 to 2024-25 on fulfillment of Power Sector Reforms. It targets outstanding debt to GSDP within 28.7 per cent in 2021-22, 29.3 per cent in 2022-23 and 29.1 per cent in 2023-24 as prescribed by 15th Finance Commission.  

The state’s tax revenue saw a decline of 7 per cent in the revised budget estimates for 2021-22 compared to the estimates for the year set in the interim budget, while showing a 15 per cent increase compared to the revised estimate for 2020-21.

As against the Interim Budget Estimates of Rs 1,35,642 crore and RE for 2020-21 of Rs 109,968 crore, the State‟s Own Tax Revenue (SOTR) estimates in the Revised Budget Estimates 2021-22 is expected to be Rs 1,26,644 crore, showed the state’s first paperless Budget presented by finance minister Thiagarajan on Friday. The state’s total revenue receipts too saw a decline of 8 per cent in the revised budget. The state’s public debt for the year was estimated to be Rs 98,393 crore, up 6 per cent compared to Rs 92,498 crore in the RE for 2020-21.

The state that was facing an unprecedented financial situation is likely to see an estimated debt outstanding for the current financial year at Rs 5.7 trillion, as compared to Rs 4.5 trillion in 2020-21. The overall capital outlay for the Revised Budget Estimates 2021-22 has been scaled down to Rs 42,181 crore from the Rs 43,171 crore provided in the Interim Budget Estimates.

A total provision of Rs 19,873 crore has been made in the Revised Budget Estimates 2021-22 towards subsidies to free supply of agricultural power, domestic supply and for take over of losses of TANGEDCO. School Education was accorded the highest importance in this Budget, with an overall allocation of Rs 32,560 crore.

“The budget’s focus on better water management and delivery of drinking water is to be welcomed. Only around 31 per cent of the state population had access to piped water in their homes in 2015-16 as per the National Family Health Survey. The budget announced Jal Jeevan Mission, which aims to provide safe and adequate drinking water through 12.7 million household tap connections. The attention to clean-up 200 lakes and ponds, and the construction of check dams and shutters in coming years is also a much-needed step,” said Vidya Mahambare, Professor of Economics, Great Lakes Institute of Management. Targeting the industrial sector,  the state will create a  land bank of 45,000 acres in the next five years.