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Tamil Nadu economy has staged a strong comeback from the impact of the second wave of the Covid-19 pandemic. Thanks to pick-up in economic activity, higher tax collections and increased devolution from the Centre, the aggregate revenue receipts of the State, at the end of the third quarter, has even surpassed the pre-Covid levels.
According to provisional data from the Comptroller and Auditor General (CAG), Tamil Nadu’s total revenue receipts as of Q3FY22, stood at ₹1,33,873 crore or 66 per cent of the budget estimates for FY22. In comparison, revenue receipts during the corresponding period in pre-Covid FY20 stood at ₹1,23,129 crore or 65 per cent of the budget estimate for the fiscal.
The State’s revenue receipts during April-December FY21 stood at ₹1,13,938 crore or only about 52 per cent of the budget estimate for the fiscal.
Within revenue receipts, tax revenues was at 67 per cent of the budget estimate at ₹1,03,516 crore against a tax revenue of ₹97,761 crore (65 per cent of budget estimates) in the corresponding period in FY20.
Spike in SGST
State Goods and Service Tax (SGST) at ₹30,946 crore and Stamp & Registration Fees (₹10,086 crore) were at 73 per cent and 76 per cent of their budget estimates, respectively. In the corresponding period in FY20, SGST and Stamp & Registration Fees stood only at 59 per cent and 62 per cent of their budget estimates.
“Tamil Nadu is a relatively open economy with global imports/exports. I believe the higher SGST may be related to higher imports. The recovery in the stamp & registration fees suggests an improvement in the real estate market. I would expect that this collection will rise markedly once the real estate valuation guidelines are revised upwards,” said Vidya Mahambare, professor of economics, Great Lakes Institute of Management.
NR Bhanumurthy, vice-chancellor of Dr BR Ambedkar School of Economics University, attributed the spike in SGST to record GST collections by the Centre and higher tax devolution to the States. Amid sharp economic rebound, the Centre’s monthly GST collections stayed upwards of ₹1.25-lakh crore from October 2021. It touched a high of ₹1.38-lakh crore in January 2022.
“The Centre not only shared the state’s share but also shared the advance GST collections so that the state governments can plan their expenditure accordingly. In fact, this not only includes the current tax but also has little bit of future tax and this is not something specific to Tamil Nadu but for all other States,” he added.
Besides, Tamil Nadu’s taxes on sales, trade, etc (₹34,205 crore), State Excise Duties (₹5,716 crore) and Other Taxes and Duties (₹4,042 crore) are all closer to their pre-Covid levels.
Non-tax revenue at ₹6,225 crore, however, was only 44 per cent of the budget estimates compared with ₹7,791 crore (58 per cent of budget estimates) during the corresponding period in FY20.
Revenue expenditure drops
Not just tax collections, the State also displayed control over revenue expenditure. At ₹1,52,269 crore, the revenue expenditure of the State stood only at 57 per cent of the budget estimates as of Q3FY22 against 68 per cent of budget estimates in Q3FY20.
Bhanumurthy said the drop in revenue expenditure could be due to postponement of lumpy expenditure by the State to the last quarter of the current fiscal. Both Bhanumurthy and Mahambare said there will be a significant interest payment outgo in the fourth quarter, which could drive up the revenue expenditure.
“There is a change in the way in which centrally-sponsored schemes (CSS) are to be implemented in the current fiscal and that would curtailed the revenue expenditure and the other explanation could be that there can be unspent balances in these schemes,” he added.
Tamil Nadu also upped its capital expenditure substantially during the current fiscal. As of the third quarter, the State’s capital outlay stood at ₹25,227 crore or 57 per cent of the budget estimates. This was much higher than ₹13,903 crore of capital outlay made during the same period in FY20.
Mahambare said that the capital expenditure utilisation, in the first three quarters of the current fiscal, was higher than the previous two years due to the opening up of the economy.
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