CHENNAI: A CAG report on Tamil Nadu government’s FY24 finances had appreciation for a sustainable debt to GSDP ratio but cautioned it on multiple counts, including elimination of revenue deficit, drastic reduction on capital expenditure, and rising interest payments.
The state was borrowing to meet current consumption and repayment on borrowings instead of creating capital or development activities, the CAG said. The state’s Gross State Domestic Product (GSDP) grew 10.92% from Rs 17.43 lakh crore in FY20 to Rs 27.21 lakh crore in FY24 with a total debt of Rs 7.62 lakh crore.
While TN’s revenue receipts grew by 8.55% over the previous year, total expenditure went up from Rs 3.26 lakh crore to Rs 3.59 lakh crore, a jump of 9.89%. The state used 52% of its revenue expenditure on interest payments, salaries and pensions, while another major expenditure in FY24 was Rs 1,000 honorarium paid to women per month under the Magalir Urimai Thogai scheme.
However, interest payments consumed 17.37% of revenue expenditure in FY24, up from 15.2% in FY20, the report said, which meant that resources were insufficient for other productive purposes. This also puts a burden on future generations, the report added.
“Rising interest payments present a potential risk that warrants attention,” the report said while commending the state’s stable economic condition suggesting that it was well-positioned to manage its debt. The report pointed out that the growth in capital expenditure had dropped from 11.92% in FY22 to 2.45% in FY24 and that only 11.56% of its total expenditure was spent on capital works.
CAG said that the TN government was using borrowed funds mainly for meeting current consumption and repayment of borrowings instead of capital creation or development activities.
Revenue deficit touched Rs 45,121 crore, up 24.59%, which meant that fiscal deficit was at 3.32%, well above the 3% target set by the TN Fiscal Responsibility Bill for FY25.
In light of this on Friday, the state assembly adopted the Tamil Nadu Fiscal Responsibility (Amendment) Bill, 2024, which deferred the achievement of zero revenue deficit and 3% fiscal deficit target to FY27 and March 31, 2026, respectively. An interesting statistic in the analysis of revenue deficit for FY24 was a Rs 20,000 crore hole due to the drop in Grant in Aids (GIA) from the union government. However, the state correspondingly benefitted from a 45% and 22.63% jump in non-tax revenue and share of central taxes over the previous year.
The CAG report attributed the increase in growth rate of loans and advances to the debt taken for funding the Chennai Metro Rail Phase-II.
The auditor also pointed out that subsidies had increased from 9.57% of revenue expenditure in FY20 to 12.19% in FY24.
