As Tamil Nadu battles soaring revenue deficit – set to rise 9.7 per cent in 2024-25 – the numbers show that the State finances are groaning under the burden of salaries, pensions and interest payments.

The government has budgeted ₹84,932 crore for salaries, ₹37,663 crore for pensions (₹1,22,594 crore for salaries plus pension); and ₹63,722 crore for interest payments. All three elements add to ₹1,86,316 crore.

The government plans to borrow ₹1,55,584 crore in 2024-25 , which will take the total outstanding borrowings, at the end of March 2025, to ₹8.33-lakh crore—up from ₹7.26-lakh crore as per Budget Estimate for 2023-24, marking an increase of 14.7 per cent. This will be 26.41 per cent of the State’s gross domestic product (₹31.55 lakh crore, estimated to be up 15.14 per cent in nominal terms). 

Budget documents presented by Tamil Nadu’s Finance Minister, Thangam Thennarasu to the State Assembly, today, show that the salaries and pensions are only set to increase. About 16 lakh people get their salaries or pensions from the government. The salaries bill will rise to ₹91,726 crore and ₹99,064 crore in 2025-26 and 2026-27 respectively; ‘pensions will go up to ₹41,430 crore and ₹45,573 crore in 2025-26 and 2026-27 respectively.

In 2022-23, the salaries plus pensions bill came to ₹97,055 crore.

Banking on revenue receipts 

To foot these growing expenditures, the State government is banking on higher revenue receipts—even though the actual revenue receipts have lagged Budget Estimates previously.

For 2023-24, the government had expected to get ₹2.79-lakh crore by way of revenue receipts, but it got ₹2.72-lakh crore. It has budgeted to get ₹2.99-lakh crore in 2024-25—and further on to ₹3.41-lakh crore and ₹3.94 lakh crore in the next two years, hoping for liberal increase of 14.33 per cent and 15.54 per cent, respectively. 

Within revenue receipts, the State government has assumed a 14.7 per cent increase in own tax revenue—from ₹1.70-lakh crore in 2023-24 (Revised Estimate) to ₹1.95-lakh crore for 2024-25 (Budget Estimate). In the subsequent two years, own tax revenues are projected to grow by 16 and 18 per cent. 

Share of central taxes 

Only in share of the central tax pool, Tamil Nadu has done better than its projections—it got ₹45,052 crore in 2023-24, against the projection of ₹37,571 crore—an increase of 20 per cent. The government budgets to get ₹49,755 crore in 2024-25 and projects to receive ₹57,964 crore and ₹67,528 crore in the subsequent two years. 

The government of Tamil Nadu is clearly betting on big growth to keep from falling into a financial quagmire.