Tamil Nadu is in red; biggest borrower with a public debt of Rs 2.63 lakh per family: government report


Tamil Nadu’s fiscal situation is in dire circumstances and the status quo cannot continue as there are no more buffers and no fiscal space that would allow a delay, said a white paper released on Monday by the Finance Minister of Palanivel Thiaga Rajan State.

The dire fiscal scenario is partly due to external circumstances, but to a large extent to structural flaws in governance that have not been rectified in a timely manner, according to the DMK government’s first such report after entering into office. function in May.

The worsening deficit situation has led the state to depend too much on debt and the public debt is Rs 2,63,976 per family in Tamil Nadu.

Speaking to reporters, Thiaga Rajan said the decline was reversible thanks to the “political will and administrative skills” of his party.

The white paper is not an attempt to abandon commitments made to the people in the recently concluded elections, he said.

“We understand that far-reaching structural reforms in many aspects, starting with the functioning of government and spanning many areas of policy and legislation, will be necessary to achieve our ambitious goals.”

The party has only been in power for about three months and a turnaround would be facilitated step by step over the five-year term, he said.

When asked if there would be an upward revision of state taxes, including those for vehicle registration, he said “corrections” are needed, pointing to a non-revision for about 15 years old.

Chief Minister Stalin would look into the matter and ministers with portfolios of specific departments would discuss with him, he said.

The government must take a decision in this regard, he said, adding that importance should be given to areas including social protection initiatives like old age pensions rather than people buying a car for a crore. of rupees.

“Take a few and give a lot fairly… zero taxes don’t make sense,” he said and insisted on a fair tax system. Pointing to the reforms, he said the COVID-19 Rs4,000 cash relief to rice ration card holders has also been given to taxpayers and government employees.

Likewise, there is a lack of clarity on the actual beneficiaries of social assistance schemes such as those offering subsidies to purchase scooters.

There is no adequate data when it comes to subsidies and this should be corrected and some programs are being considered to address the situation, he said.

Emphasizing transparency, he said that in some departments there is an internal audit underway and in such a scenario there would be no room for fairness. “The basic system must be changed.”

About a lakh of crore rupees was “lost” while incurring expenses due to factors such as inefficiency, he said.

The DMK had often targeted the AIADMK regime while in opposition for mismanagement and the ruling party had promised a white paper on the budget situation to ensure “transparency”.

The report says the Covid-19 pandemic has dramatically worsened the situation and highlighted how vulnerable Tamil Nadu is currently. “There are no more buffers. No budgetary margin that will allow a delay.” “The status quo (attitude) cannot continue, and our approach must fundamentally change if we are to break this vicious cycle of increasing debt and interest charges.

On the other hand, it is an opportunity to carry out reforms once in a generation, many of which should have been undertaken years ago by any responsible government. The white paper indicates that Tamil Nadu’s fiscal situation has deteriorated for eight years. and such a long-term trend has affected development investments which in turn affected growth.

Between 2006-13, five out of seven years, TN recorded a net surplus in revenue. However, since 2013, the revenue deficit has become a recurring phenomenon.

The DMK was in power from 2006 to 2011 and the AIADMK from 2011 to 2021. Tamil Nadu’s revenue deficit (DR) stands at Rs 61,320 crore (FY2020-21), or 3.16% of gross domestic product of the state.

The average RD for all states and UTs was 0.1% of GDP in 2017-18 and 2018-19, and for TN it was 1.5% and 1.4% of GSDP, respectively.

The state budget deficit (FD) for fiscal year 2020-21 is Rs 92,305 crore (4.43 percent of GSDP).

“The current levels of the budget deficit are unsustainable mainly because a substantial part of the budget deficit is simply used to finance the revenue deficit.” The ratio of R&D as a percentage of FD is 52.48% for 2016-21 and it was only 14.94% in 2011-16.

This upward trend in budget deficits linked to the revenue deficit “must be financed mainly by borrowing”, which has sharply increased the total outstanding debt.

The period since 2012-13 has seen a continuous increase in the overall debt level of the state government.

It is expected to reach Rs 5,70,189 crore on March 31, 2022 according to the provisional budget forecast for 2021-2022 and, therefore, “the public debt as a percentage of MSRP is 26.69%. government debt as a percentage of GDPD was 18.37% in 2007. ”The total debt stock in the revised 2020-21 estimates is Rs 4,85.502.55 crore, which already represents 24.98% of the GSDP. The outstanding liabilities of TN as a percentage of GSDP are significantly higher than that of the comparator states of Maharashtra, Gujarat and Karnataka.

“Tamil Nadu has the dubious distinction of being currently the largest free market borrower of any state in India.”

Almost all states reduced the public debt-to-MSRP ratio between 2003 and 2019. Tamil Nadu also followed the trend by reducing the ratio from 26% to 17% until 2012. However, the situation has worsened since then.

The budget deficit financed by “other means” for 2016-21 represented 12.68% of the total budget deficit and, in actual figures, amounts to Rs 39,071 crore.

Particularly during the last 3 years, the amounts withdrawn from the public account to manage the budget deficit are significant and more than 10 percent of the DF in proportion.

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