CHENNAI: Finance Minister Thangam Thennarasu said the fiscal deficit (FD) of the state government is estimated to decrease to 3% (Rs 1,06,963 crore) of the GSDP during 2025-26. This is after the actual FD for 2023-24, and the revised FD estimate for 2024-25, respectively coming down from 3.45 % and 3.44 % (as projected earlier) to 3.32 % and 3.26 %.
While Thennarasu had said during the last year’s budget that the state was taking a “glide path” of fiscal consolidation by gradual reduction of the FD, the budget presented for 2025-26 on Friday looks at a sharp reduction to 3 %.
This is despite the state falling short of its last year’s target of total revenue receipts, which was revised downwards from Rs 2.99 lakh (Budget estimate - BE - 2024-25) crore to Rs 2.93 lakh crore in the Revised Estimate (RE) 2024-25.
The state especially fell short of meeting its ambitious target of increasing its State’s Own Tax Revenue (SOTR) by 14.7 % to Rs 1.95 lakh crore in 2024-25. In the RE for 2024-25, this was revised down to Rs 1.92 lakh crore.
The grants-in aid from Union government came down, especially due to the non-release of Samagra Shiksha funds to the tune of Rs 2,152 crore. A further fall in total revenue receipts seems to have been averted, interestingly, in fact by an increase in the Union government’s share of central taxes, which was increased to Rs 52,491 crore in the RE for 2024-25 compared to Rs 49,755 crore projected last year.
However, Thennarasu said this was due to higher tax collections by the union government and argued that the overall funds received from centre as a share of state’s GSDP has consistently come down from 3.41 % in 2016-17 to a “meagre” 1.96 % in the RE 2024-25.
With the total revenue expenditure expected to grow by 9.65 % to Rs 3,73,204 crore, he said the revenue deficit (RD) is expected to be Rs 41,635 crore in 2025-26. It is noteworthy that the RD was revised downwards by around Rs 3,000 crore to Rs 46,467 crore in the RE 2024-25 from Rs 49,279 from the BE in 2024-25
Addressing media after the budget, Finance Secretary T Udhayachandran stressed though the overall debt of the state looked high in absolute numbers, it was within the limits as a percentage of GSDP.
He said the state government was taking various measures in this direction, especially by leveraging technology. He highlighted that by adopting a “just in time” release method, it identified Rs 11,000 crore, which were sent by the government to various departments, lying idle in bank accounts and this amount was in turn used effectively for other needs. Stating this helped TN borrow Rs 3,000 crore less than the projected borrowing in the current year, it is expecting to borrow Rs 11,000 crore less than the projected figures in 2025-26.