CHENNAI: The White Paper on Tamil Nadu’s finances for the five-year period between 2021-22 and 2025-26 released by Finance Minister N Marie Wilson on Tuesday painted a grim picture. By factoring in contingent liabilities, guarantees, and obligations of public sector undertakings, the report pegged TN’s “true debt burden” at Rs 13.18 lakh crore.
The report, which described the financial deterioration as “structural rather than cyclical”, said the state has witnessed a near doubling of outstanding debt to about Rs 10 lakh crore, a record revenue deficit of Rs 78,324 crore, sharp decline in SOTR-GSDP ratio, and rise in interest payments that exceeded capital expenditure during the five-year post-Covid period.
The FM, however, exuded confidence that the present situation can be reversed through corruption-free governance, stronger revenue mobilisation, expenditure efficiency, checking ‘leakages’ in revenue resources, and by reforming public sector undertakings.
‘Actual revenue deficit may reach Rs 90,500 cr, fiscal deficit Rs 1.64 lakh cr’
Addressing a press conference at the state secretariat, Finance Minister N Marie Wilson, said, “The decline will be corrected, and we will restore Tamil Nadu to the number one position.”
Asked about schemes for which the previous government may have allocated funds unnecessarily, the minister said, “We never said that welfare schemes are not good. Announcing schemes without income generation leads to difficulty. That is what we are pointing out.”
Answering another question, the minister said, “We chose the post-pandemic period since all states are in the same position. The losses in PSUs can be described as man-made disaster.”
Replying to a question about the ‘leakage in revenue resources’, the minister said, “In Anna Nagar, the market value of land is Rs 25,000 per square foot, but it was undervalued using guideline value. So, everything depends on clean administration. If we can fix leakages through corruption-free governance, we can move from where we are right now.”
When pointed out that the TVK government has not spoken about fulfilling their election promises, the minister said, “Whatever promised will be fulfilled with a timeline in consultation with the CM.”
The white paper contended that unlike peer states such as Karnataka, Maharashtra and Gujarat, which used the post-pandemic recovery to strengthen their fiscal positions, Tamil Nadu’s key fiscal indicators worsened, leaving the state with shrinking fiscal space and mounting long-term challenges.
The paper said the interim budget 2026-27 is estimated to have understated revenue expenditure by about Rs 27,800 crore and overstated revenue receipts by Rs 14,000 crore, potentially raising the Revenue Deficit from Rs 48,696 crore to Rs 90,500 crore and the fiscal deficit from Rs 1.22 lakh crore to Rs 1.64 lakh crore. With the maximum borrowing capacity estimated at only Rs 1.52 lakh crore, the state could face a financing shortfall of around Rs 11,600 crore.
The report, through six key findings, sought to give an overall picture of the state’s finances for the above period.
Regarding outstanding debt, the white paper said the liabilities have nearly doubled from Rs 5.13 lakh crore on April 1, 2021 to around Rs 10 lakh crore by March 31, 2026. The Debt-to-GSDP ratio has remained persistently high at 28.3% in 2025-26, with no meaningful reduction from the Covid peak. The report also warned that the debt burden is more concerning as Tamil Nadu’s demographic dividend is shrinking, reducing the future working-age population available to support fiscal obligations.
The second major finding is that rising interest payments are increasingly consuming the state’s revenues and limiting developmental spending. In 2025-26, the annual interest burden is estimated at Rs 67,050 crore, accounting for nearly 23% of total revenue receipts and around 35% of SOTR. The report pointed out that the state now spends more on servicing past debt than on creating new assets, with interest payments exceeding capital expenditure by approximately one-third.
Underscoring the point that Tamil Nadu’s revenue deficit is no longer a temporary phenomenon, the white paper said the revenue deficit for 2025-26 is projected at Rs 78,324 crore, equivalent to 2.2% of GSDP, which is the highest ever recorded by the state in absolute terms.
The three other findings said that Tamil Nadu’s fiscal position has weakened due to a sharp decline in its own-tax effort, with State Own Tax Revenue (SOTR) falling from 5.93% of GSDP in 2021-22 to 5.45% in 2025-26-the lowest level in two decades and the steepest post-Covid decline among peer states.
At the same time, high committed expenditure on salaries, pensions, and interest payments has reduced fiscal flexibility, leaving capital expenditure at just 11.8% of total spending, the lowest among benchmark states.
Responding to a question, Finance Secretary M A Siddique said, “This exercise is not aimed at pinpointing anything about the previous government. As the minister said, we are referring to the last 10 to 15 years (on some issues). When a white paper was presented in 2021-22, the position was bad. Now it is worse, and it is worsening. We have to correct it. But correcting this is not going to be easy. It will take time. “
Waste paper, not white paper, says Thennarasu
Former Finance Minister Thangam Thennarasu accused the white paper report released by his TVK successor a hyped flop show for not fulfilling the colourful election promises made to the people. To escape the wrath of the people and fearing protests by the people, demanding the incumbent government to fulfill their poll promises, the government has released the report, he tweeted on social media platform ‘X’. Terming the white paper report ‘escapism’ of the TVK government, the DMK leader assured that he would, however, soon give a detailed report in response to the report.