CHENNAI: TVK’s poll victory, riding on the back of Vijay’s popularity and a populist manifesto, has raised the question of whether TN can finance a sweeping expansion of welfare schemes without straining its balance sheet.
A key component of the programme is a step-up in direct transfers – Rs 2,500 a month for women heads of households, Rs 4,000 for unemployed graduates and Rs 2,500 for diploma holders, alongside six free LPG cylinders a year and wider power subsidies.
The slate extends to Rs 15,000 annually to curb school dropouts, marriage aid in gold and saree, concessional finance for women-led SHGs entering MSMEs, and a universal newborn package.
Economists estimate the full-year bill could be Rs 1 lakh crore, depending on beneficiary coverage, with cumulative spending potentially lifting the state’s outlay beyond Rs 4.5 lakh crore over five years. With TN’s total own tax revenue in 2024-25 was approximately Rs 2.1 lakh crore, the welfare expansion alone could consume nearly half of it.
For N R Bhanumurthy, director of the Madras School of Economics (MSE), the issue is less about any one party than a structural drift in state finances. “This is the time for a white paper on the fiscal condition of states. We also need to examine whether new promises duplicate existing programmes,” he said.
He argues the sequencing is critical: identify beneficiaries, audit existing schemes and rationalise spending before rollout. “The state has a strong welfare record, but some schemes may need to be relooked at. Expenditure rationalisation is essential to create fiscal space,” he said.
Bhanumurthy backs targeted cash transfers as a tool to narrow gender gaps, while emphasising that direct benefit transfers could reduce leakages. He cautioned, however, against relying on headline cost estimates before beneficiary numbers are finalised, and warned welfare becomes problematic only if it crowds out capital expenditure.
K Shanmugham, former MSE director, points to tighter near-term constraints. “The interim budget is already framed within borrowing limits. Finance commission norms keep the fiscal deficit around 3% of GSDP, with limited flexibility,” he said, adding TN’s fiscal deficit is currently hovering around 2.8-3%, leaving very little headroom before hitting the ceiling.
The enhanced cash transfer alone would require an additional Rs 18,000-Rs 20,000 crore annually. With a large share of spending locked into salaries, pensions and interest payments, adjustment options are limited. “If revenue doesn’t rise proportionately, the only option is higher borrowing,” he said, warning of debt risks. TN’s total capital expenditure in 2024-25 was around Rs 52,000 crore.
“The trade-off? Well-designed transfers can lift consumption and living standards, but sustained expansion without matching revenues could harden fiscal rigidities,” he added.
TVK’s key poll promises
Rs 2,500 per month for women heads of households
6 free LPG gas cylinders a year
1 sovereign gold ring for all newborns
Rs 15,000 education assistance for mothers of schoolchildren
Rs 4,000 monthly assistance for unemployed graduates
Rs 5 lakh as new start-up loans
Rs 25 lakh for biz launch loans