TN’s debt to cross ₹5 lakh crore in 2021-22

Deputy CM O. Panneerselvam presented the interim budget on Tuesday, which revealed finances were significantly hit by the COVID-19 pandemic

Ahead of the Assembly polls, Tamil Nadu Deputy Chief Minister O. Panneerselvam, who hold the Finance portfolio, on Tuesday presented the interim budget, which reflected a significant impact from the outbreak of the COVID-19 pandemic on the finances.

The State Own Tax Revenue is expected to be ₹1,09,968.97 crore in the Revised Estimates 2020-21, which represents a drop of 17.64% against ₹1,33,530.30 crore anticipated as revenue in the Budget Estimates 2020-21, he said.

Mr. Panneerselvam said due to the COVID-19 pandemic and an increase in spending for health and relief, the total revenue deficit in 2020-21 is revised to ₹65,994.05 crore, up from ₹21,617.64 crore projected in the Budget Estimates 2020-21.

Drop in revenue

The pandemic has caused a sharp drop of revenue, while expenditure levels had to be enhanced to protect people’s welfare. Hence, it was completely unavoidable that the government had to resort to borrowings resulting in a higher fiscal deficit, he said.

“The pandemic has necessitated additional expenditure on the revenue account of ₹12,917.85 crore primarily for health and relief related expenditure,” Mr. Panneerselvam said.

On the whole, the fiscal deficit in the Revised Estimates 2020-21 is expected to widen to ₹96,889.97 crore, which is 4.99% of the GSDP. This is within the limits recommended by the 15th Finance Commission and is in accordance with the amended Tamil Nadu Fiscal Responsibility Act 2003, he said.

Coming to the Interim Budget Estimates for 2021-22, given that revenue receipts dropped considerably in 2020-21, a rebound for receipts are expected in 2021-22.

For 2021-22, the interim budget estimated an overall revenue deficit of ₹41,417.30 crore and fiscal deficit is estimated at ₹84,202.39 crore.

“The elevated level of the fiscal deficit in the current financial year was unavoidable and this deficit has to be brought down gradually to ensure there is no adverse impact on the economy. Even the 15th Finance Commission has recommended that a higher fiscal deficit of 4% of GSDP should be permitted to States in 2021-22,” Mr. Panneerselvam contended.

The overall debt outstanding as on March 31, 2021 is estimated to be ₹4,85,502, crore and ₹5,70,189.29 crore as on March 2022, which is well within the norms prescribed by the 15th Finance Commission, he said.

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