7th Pay Commission recommendations may cost TN govt ₹14,719 cr more a year

Our Bureau Chennai | Updated on March 15, 2018

Tamil Nadu Finance Secretary K Shanmugam   -  THE HINDU

The 7th Pay Commission has caused stress on Tamil Nadu’s finances, which led to higher-than-projected revenue deficit in 2017-18, according to the Finance Secretary K Shanmugam.

Last year’s Budget had projected a revenue deficit of ₹15,930 crore, but the revised estimate pegs the amount at ₹18,370 crore.

Salary expenditure

“It was off the mark specifically due to the implementation of the 7th Pay Commission, which led to a spike in the revenue deficit. However, it is getting stabilised from the current year and is expected to go down in the future, given the fact that the revenues are expected to grow at 14 per cent while the normal growth of salary expenditure is expected at 8-9 per cent,” he said at the post-Budget press conference.

The additional burden on account of the implementation of the new pay hikes is estimated at ₹14,719 crore a year.

Despite the burden on the State’s finances, the Budget has projected the fiscal deficit to GDP ratio at 2.79 per cent for 2018-19, which will be below three per cent fiscal norm. This is after projecting a revenue deficit of ₹17,491 crore and fiscal deficit of ₹44,481 crore for 2018-2019.

GST impact

Discussing the GST impact, Shanmugam admitted that there was an increase in revenue growth after GST implementation.

In pre-GST period (VAT) — during March-June 2017, the growth rate was 7.04 per cent as against 6.96 per cent in the same period previous year.

“In the post-GST regime (July 2017 to February 2018), the growth rate was 15.45 per cent when compared with 10.72 per cent in the same period previous year. So, it is 4.4 per cent higher after GST implementation and we feel at least 3-4 per cent increase is due to GST,” he added.

The State had projected SOTR (State’s own tax revenue) of ₹99,590 crore for 2017-18 in last year’s Budget. But, in the revised estimate, it is pegged at ₹98,693 crore. This is mainly due to drop in excise duty collection to the tune of about ₹500 crore.

For the current year, the Budget has projected a SOTR of ₹112,616.41 crore for 2018-19. “We are making a conservative estimate on this. We are actually projecting 14 per cent increase on SOTR,” he said.

The GSDP in 2017-18 is estimated 8.03 per cent at constant prices and for 2018-19 economic growth is pegged at nine per cent.

Published on March 15, 2018

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