Revenue-starved TN seeks way out
White papers by state governments provide an accurate and detailed statement of their fiscal position and list out the immediate challenges they face. While they are an important tool in identifying problem areas, they also act as a political statement. The data on financial profligacy will inevitably point an accusing finger at previous governments while preparing the ground for some tough measures ahead.
Like most white papers, the one released by the Tamil Nadu government too paints a gloomy picture. The slowdown in economic growth has been a serious cause of concern. Its own tax revenues barely account for 5.46% of the Gross State Domestic Product (GSDP), which stands at Rs 19,43,399 crore. The Covid-19 pandemic has dealt a heavy blow to the state.
Its fiscal deficit has continued to balloon to Rs 92,305 crore for 2020-21, a massive jump from Rs 60,179 crore in the previous year. This is a state that reported a revenue surplus in five out of seven years during 2006-13. The white paper has tracked the steady deterioration of the fiscal situation over the past 15 years. It says deficits in the previous years were hidden and brought to the book only after the fiscal deficit limit of 3% of GSDP was relaxed in the wake of an unanticipated surge in pandemic-related expenditure. Total outstanding debt at the end of 2020-21 stands at a massive Rs 4,85,503 crore as per the revised estimate.
No doubt, the state government will have to initiate some tough measures to restore its revenues. It may look at hiking taxes on vehicles, probably without burdening the masses too much. Though the number of vehicles registered in TN is higher than in the neighbouring states, the tax on them in the state contributes only 0.23% of its total GSDP. The government may also look at tweaking the existing rules to enhance the tax collected from the sale of IMFL and beer. Similarly, it may also take a look at hiking the electricity tax, which is comparatively low vis-a-vis neighbouring states.