CHENNAI: Despite inheriting an unenviable fiscal position from the previous AIADMK regime, compounded by the impact of Covid-19, subsequent natural disasters and the alleged discriminatory attitude of the union government towards Tamil Nadu in releasing funds, the present DMK government has managed to maintain a growth rate higher than that of the national average while spending more on welfare as well.
The government has reiterated that the fiscal deficit and the debt to Gross State Domestic Product (GSDP) ratio are well within the limits stipulated by the union government.
The GSDP growth rate of Tamil Nadu in 2024-25 at constant prices was an impressive 9.69%, which was the highest in the country (6.5%). The first-ever economic survey of Tamil Nadu brought out by the State Planning Commission has predicted Tamil Nadu to retain a strong real growth rate of around 9% in short-term with an inflation rate of around 5%.
Besides doubling the value of merchandise export from $26.15 billion in 2020-21 to $52.07 in 2024-25, the state has also emerged as the clear leader in terms of export of electronic goods. Tamil Nadu exported $14.6 billion worth electronic goods in 2024-25, the highest in the country, followed by $7.85 billion by Karnataka. The state’s export of electronic goods has grown roughly nine-fold since 2020-2021 ($1.66 billion).
Through a Global Investors’ Meet and foreign visits by Chief Minister M K Stalin, the state has signed 897 memoranda of understanding (MoU) for investments worth Rs 10.28 lakh crore, of which work has been initiated for 624, according to the government.
The focus on growth has been complemented with expanding welfare expenditure with schemes like Pudhumai Penn, Tamil Pudhalvan, and Naan Mudhalvan, which are focused on bringing more youth into higher education and upskilling them.
This is apart from other cash-intensive welfare schemes like Chief Minister’s Breakfast Scheme, Kalaignar Magalir Urimai Thogai (KMUT), free bus travel for women, and Makkalai Thedi Maruthuvam, targeting improvement in socio-economic indicators.
The ruling DMK has not been spared of criticism by the opposition for increasing TN’s debt burden, which is expected to be at Rs 9.3 lakh crore by 2025-26.
The state government has defended the increase in debt in absolute numbers, saying debt is not a bad thing if it is used in the right manner and pointed out that debt to GSDP ratio is 26.07% (2025-26), which is less than the 27% limit sent by the union government. The DMK has also attacked the union government for the decline in its share of revenue to Tamil Nadu in proportional terms and denial of funds for schemes like Samagra Shiksha, which, according to it, has forced the government to borrow.
While the state is right in such criticisms, an area of concern that it needs to focus is further improving State’s Own Tax Revenue, which has not yielded the growth the incumbent government has expected despite increase in excise, new taxes on mining, property tax, stamps and registration duties, motor vehicles taxes, and data-driven approach to ensure fiscal discipline. Similarly, though the revenue deficit, as a % of GSDP, has come down, the fact that it still accounts for close to 40% of the fiscal deficit is worrying.
The government has acknowledged the need to improve the finances while maintaining that the situation is not alarming. It would be prudent for the government to tackle these concerns to steer the state towards its ambitious target of making it a $1 trillion economy by 2030.
(Sources for the figures quoted: TN Budget 2025-26, TN Economic Survey, Union Ministry of Statistics and Programme Implementation)