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Tamil Nadu has cut its revenue deficit by over ₹7,000 crore in FY22. It dropped to 3.08 per cent in FY22 from 4.15 per cent that was budgeted earlier. This is the first reduction in State’s revenue deficit in eight years. Consequently, fiscal deficit for the period was lower at 3.80 per cent as against the budgeted 4.33 per cent. These numbers were released by State Finance Minister Palanivel Thiaga Rajan while presenting the 2022-23 Budget on Friday.
The State’s capex in FY22 was ₹37,936 crore as against the budgeted ₹42,180 crore. The Government attributed the lower capex to the pandemic and heavy rainfall/floods which delayed the execution of projects. Revenue expenditure was also lower at ₹2,59,150 crore as against the budgeted amount of ₹2,61,188 crore.
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Economic revival, systemic improvements will drive the State’s own tax revenue growth
TN expects a 17% rise in the State’s own tax collections in FY23The fiscal consolidation in FY22 happened despite State’s own tax revenues falling short by ₹4,787 crore and non-tax revenues by ₹2,300 crore. However, the State benefited from higher than budgeted share in Central taxes and Grants (including arrears) of ₹8,400 crore.
This year, Rajan said, the State has reversed an alarming trend of increasing deficits every year since 2013-14. “This has been possible only by the application of political will and administrative skill,” Rajan added.
For FY23 the Budget has proposed no fresh taxes but takes the fiscal consolidation process forward. The State hopes to close FY23 with a fiscal deficit of 3.63 per cent and will gradually reduce it to 2.91 per cent by FY25.
It has budgeted its FY23 revenues (both own and central transfers) at ₹2,31,407 crore (₹2,03,878 in FY22), a growth of 13.5 per cent. Revenue expenditure is pegged at ₹2,84,188 crore, a growth of 9.66 per cent and capex at ₹43,043 crore, a growth of growth of 13.46 per cent over FY22RE. The State will end FY23 with a debt of ₹6,53,348 crore which is 26.29 per cent of its GSDP.
‘No clarity’
Experts opined that given the White paper that the Government brought out highlighting the precarious state of finances, more was expected. “In general, the budget is reasonable one with nothing abnormal. It is simply a continuation of last two years’ Budget." said KR Shanmugam, Director and Professor, Madras School of Economics.
While there is a decline in deficits, the question is when will the State go to zero per cent revenue deficit as stated by Rajan. There is no clarity on when State’s fiscal deficit will reach 3 per cent levels. “Also, State’s own tax revenues in FY21 is 5.6 per cent of GDP, in FY22 it is again 5.6 per cent and FY23 Budget estimates is only 5.7 per cent but when we will reach the 9 per cent levels of 2005-06 is a big question mark,” he added.
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