The tax-free Tamil Nadu Budget for 2019-20 has outlined a three-pillar approach — continuation of existing schemes, support to new programmes that are long term in nature and fiscal consolidation.

As the State expects the revenue growth trend of 2018-19 to continue into the next fiscal, it has planned a significantly higher capital outlay and a reduction in borrowings for 2019-20.

Tax collections

“Tax collections were better in this fiscal and we expect the trend to continue during next fiscal too,” said K Shanmugam, Additional Chief Secretary, Finance Department, in the customary interaction with media persons post the presentation of the State Budget.

However, he said, the Budget took a conservative approach for revenue growth projection at 13.28 per cent for 2019-20. In this fiscal, the growth in State’s own tax revenues (SOTR) was 17.54 per cent.

“Due to price increases in petroleum products, we have received higher revenues this fiscal. We don’t expect the same next year and in liquor sales, too, we have made a moderate growth projection at eight per cent as against the growth of about 15 per cent this fiscal,” he said.

With petrol prices moderating, revenues through taxes on petroleum products is expected to grow at 12 per cent, while the growth in commercial tax revenues is pegged at 14 per cent.

On the GST side, the State collected ₹33,198 crore during April-December 2018, while the projected (revised) revenue collection is ₹45,625 crore for this fiscal. The Budget has set a GST revenue target of ₹53,739 crore for 2019-20.

Capital outlay

The Budget announced a capital outlay of ₹31,251 crore, which is 20 per cent higher than the amount planned for this fiscal.

With higher capital outlay, the government has 38 new programmes including some welfare and poverty alleviation schemes, irrigation projects and infrastructure development. The amount allocated for these projects is pegged at about ₹20,000 crore.

As part of its debt-reduction focus, against a borrowing ceiling of ₹51,800 crore, the government plans to borrow only about ₹43,000 crore in 2019-20. In this fiscal, too, its borrowings were lower by about ₹3,300 crore.

For 2019-20, the outstanding debt, including provident fund, will be ₹3,97,496 crore, constituting 23.02 per cent of GSDP (gross state domestic product), which is within the debt-GSDP norm of 25 per cent.

Shanmugam said the State government had also reduced the fiscal deficit-GSDP ratio from 2.85 per cent in the revised estimate for 2018-19 to 2.54 per cent for 2019-20.

ICRA view

According to Jayanta Roy, Senior Vice- President and Group Head, Corporate Ratings, ICRA, “The government of Tamil Nadu’s revenue composition has traditionally been favourable, with a substantial three-fourth comprising State’s own tax and non-tax revenues and the balance as central transfers. Over the years, the State government’s substantial subsidy and welfare spending along with relatively high committed expenditure have enlarged its revenue expenditure.

“The government of Tamil Nadu has reported sustained and rising deficits on its revenue account since FY2014. Nevertheless, the State government continuously restricted its fiscal deficit below the Finance Commission-set norm of 3 per cent GSDP during the same period.”

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