CHENNAI: The interim budget for the year 2026-27 presented by Finance Minister Thangam Thennarasu has projected a fiscal deficit of Rs 1,21,949 crore while estimating the revenue deficit at Rs 48,696 crore. The State’s outstanding debt is expected to touch Rs 10,71,770 crore by March 31, 2027, equivalent to 26.35% of GSDP.
As per the convention, the Finance Minister did not make any new announcement since it is an interim budget and the new government which will be assuming office after the Assembly elections will be presenting a full-fledged budget for the year 2026-27.
Presenting the interim budget in the Assembly, the Finance Minister said the fiscal deficit for the current financial year (2025–26) has risen to Rs 1,24,007 crore in the revised estimates, or 3.48% of GSDP. The revenue deficit for 2025–26 has widened sharply to Rs 69,219 crore from the original estimate of Rs 41,635 crore.
The Minister attributed the fiscal stress to GST rate rationalisation, reduction in the State’s share of Central taxes, withholding of funds under centrally sponsored schemes, and additional expenditure commitments imposed by the Union government. These include Rs 15,877 crore towards loss funding for Tamil Nadu Power Distribution Corporation Limited and Rs 3,087 crore towards the Guarantee Redemption Fund.
Thennarasu said for 2026–27, total revenue receipts are projected at Rs 3,44,575 crore, marking an 11.26% increase over the revised estimates. State’s Own Tax Revenue is expected to rise to Rs 2,29,579 crore, reflecting a projected growth of 11.15%.
The Minister said the revenue expenditure in 2026–27 is estimated at Rs 3,93,272 crore, up 3.79% over the revised estimates, while capital expenditure is set to increase by 15.78% to Rs 59,562 crore, signalling a continued push for infrastructure and growth-oriented spending.
Thennarasu said the State government is planning to borrow Rs 1,79,809 crore in 2026–27 and repay Rs 60,413 crore. The government maintained that excluding Rs 9,523 crore relating to the Chennai Metro Rail Phase-II project - which it said should be reflected in Union government accounts - the debt-to-GSDP ratio would stand at 26.12%.
The Medium Term Fiscal Plan annexed to the interim budget projects a gradual reduction in fiscal deficit to 2.89% of GSDP in 2027–28 and 2.80% in 2028–29, with the debt-to-GSDP ratio expected to decline to 25.43% by 2028–29.
Despite the elevated deficit levels, the government asserted its commitment to fiscal consolidation under the Tamil Nadu Fiscal Responsibility Act, 2003, while sustaining capital investment and welfare expenditure.
