With mounting debt and growing deficit fuelled by increasing expenditure and diminishing revenues, the Tamil Nadu government is banking on an upswing in economy to make both ends meet in 2016-17.
In the first budget presented today after its re-election in May, the government has not levied any new taxes or hiked rates.
New expenditure, including welfare measures promised ahead of the elections, has added over ₹6,700 crore to the revenue deficit.
The revenue shortfall in the revised budget is ₹15,854 crore, up from the interim budget estimate of ₹ 9,154 crore in February.
Outstanding debt
Fiscal deficit is ₹40,533 crore and the overall outstanding debt is at ₹2,52,431 crore. Interest payments in 2016-17 to service its debt will be ₹21,215 crore.
The Tamil Nadu Finance Minister, O Panneerselvam, said the slow economic conditions have led to low growth in the State’s own tax revenue, including stagnation in collection of sales tax on petroleum products.
Estimates of commercial tax revenue have been revised to ₹67,629 crore against the interim estimate of ₹72,326 crore. The overall tax revenue is pegged at ₹90,691 crore, down from the earlier estimate of ₹109,815 crore.
Target areas
He said the budget carries forward the State government’s long-term development goal by grouping schemes under five State Missions and 11 special focus areas of development.
The State Missions cover water resource management and revival of the traditional ‘kudimaramath’ – maintenance of water infrastructure by users, housing for all, poverty reduction and economic empowerment, clean Tamil Nadu and skill development. The 11 special focus areas cover agriculture and allied sectors, urban infrastructure, tourism promotion, MSME development, infrastructure development, corridor-based development of industrial areas and ease of doing business, quality education and health for all, social security with focus on women and children; urban transportation; and good governance and transparency.
Vision 2023
The budget carries forward the Vision 2023 document that sets out the development agenda for the State. The document was released in March 2012 by tChief Minister J Jayalalithaa during her previous tenure. Following the budget presentation, the Finance Secretary, K Shanmugam, briefing media persons, said the government had decided there would be “no new tax, no concessions and status quo would be maintained.”
12% growth projection
There is scope for optimism on an improvement in the overall economic situation. This is also the reason for the government projecting a 12 per cent growth in its own tax revenue in the current year.
In April-May, there has been a 7 per cent growth in tax on transport vehicles and there are signs of an upswing across sectors. The main reasons for the decline in revenue last year had been the economic stagnation and drop in revenue from petroleum products, cement, steel and automobile sector.
While revenue from petroleum products had stagnated around ₹10,000 crore in the last three years, there had also been a 7 per cent drop in 2015-16 as the State government had not increased VAT rates.
Welfare and development continue to be a strong focus area with more than one-third of the budget, about ₹ 57,826 crore, devoted to social sectors, he said.