The Tamil Nadu government on Friday presented a revenue-deficit, zero-tax Budget for financial year 2020-21. Due to the rising level of salary, pension, interest payments, debt/losses of TANGEDCO, the revenue deficit for the fiscal 2021 has been pegged at Rs 21,617.64 crore. The net outstanding debt as at the end of March 31, 2021 is expected at Rs4,56,660.99 crore and debt to GSDP ratio will be 21.83%, which is well within the norm of 25%, said state deputy chief minister and finance minister O Panneerselvam.
Presenting his 10th Budget, the full-fledged one before the state elections in 2021, Panneerselvam said, “Tamil Nadu continues to see sustained increase of its revenue deficit. The burden imposed on the state finances by the takeover of debt and losses of TANGEDCO under the UDAY scheme, the lag effect of the implementation of the 7th Central Pay Commission, the slower growth in tax revenue, both at the Centre and state levels, have all caused the increased revenue deficit.
He said the salary and pension related expenditure shows a consistent increase. The state government is committed to find ways to contain the overall level of non-development expenditure and find additional resources to finance growth oriented expenditure.
According to him, the total receipts on account of the state’s own tax revenue in the Budget Estimates 2020-2021 are estimated at Rs1,33,530.30 crore. The receipts under the non-tax revenue are expected to be Rs15,898.81 crore. The modest increase in Tami Nadu’s share of devolution based on the recommendations of the 15th Finance Commission has meant that the share of Tamil Nadu in central taxes is estimated at Rs32,849.34 crore. The grants-in-aid have been projected as Rs37,096.69 crore, including a sum of Rs4,025 crore recommended for Tamil Nadu as the post devolution revenue deficit grant. The total revenue receipts in Budget Estimates 2020-21 are estimated at Rs2,19,375.14 crore.
He said the revenue expenditure has been projected on a realistic basis for 2020-2021 at an aggregate level of Rs2,40,992.78 crore. All salary, pension, interest payments and scheme-related expenditure have been fully budgeted for and the revenue deficit for 2020-21 is estimated to come down to Rs21,617.64 crore.
“Despite the many fiscal constraints, Tamil Nadu remains steadfast in adhering to fiscal discipline and has maintained key fiscal ratios, including fiscal deficit and debt to GSDP, within the prescribed norms. During 2020-21, even as capital outlays have been enhanced to the growth enhancing levels, the overall fiscal deficit has been contained at Rs59,346.29 crore, which is 2.84% of GSDP and within the statutory limit. In order to finance the fiscal deficit during 2020-2021, it is estimated that Rs59,209.30 crore will be raised as net debt against the overall permissible borrowing limit of Rs62,757.80 crore.
Therefore, the net outstanding debt as on the end of March 31, 2021 is expected at Rs4,56,660.99 crore and debt to GSDP ratio will be 21.83%, which is well within the norm of 25%,” he further said in his Budget speech.
“With the implementation of Integrated Financial and Human Resources Management System (IFHRMS) by modernising Budget formulation and fiscal risk management, securing expert advice and consistent efforts within government, I am confident the finances of the state will be even better managed in 2020-21”, Panneerselvam said, adding that the state government requested a team from the International Monetary Fund (IMF) to review and advice on Tamil Nadu’s public finance management systems, especially relating to Budget formulation and fiscal risk management.
An IMF technical team visited Tamil Nadu in December 2019 and submitted its report on the same and the state government will study the report and implement its recommendations, by availing technical assistance from the IMF.
In his speech, the deputy chief minister said due to the global and national level economic headwinds, the all India growth estimates for 2019-20 have been revised downwards and projected at 5% in constant price terms. But Tamil Nadu has withstood these fierce headwinds. Due to the diversified nature of the economy, the sustained policy initiatives, but above all by the dint of hard work and effort by the industrious and productive people of the state, Tamil Nadu’s economy grew at 8.17% in 2018-19.
In 2019-20, growth is projected to be 7.27%, which is significantly higher than the projected all India growth rate of 5%. “We expect an even stronger growth performance in 2020-21,” the finance minister added.
Following the 15th Finance Commission recommendations, the inter-se horizontal share of Tamil Nadu has increased marginally from 4.023% to 4.189% which is a welcome reversal in the trend of Tamil Nadu’s share consistently going down in the last few finance commissions’ reports. The 15th Finance Commission has accepted Tamil Nadu’s assessment that the state will have a post devolution revenue deficit and recommended a revenue deficit grant of Rs4,025 crore, he added.
Some of the schemes announced by Panneerselvam in his Budget speech, including reduction of the Stamp Duty currently applicable for rental agreements for residential property for a period up to five years, from the current 1% to 0.25%.
The registration charges on such agreements will also be reduced from 1% to 0.25%; to sustain sugarcane production, a special additional assistance of Rs75 crore will be sanctioned in 2020-21 to enable sugarcane farmers to adopt micro irrigation and will also pay a transport subsidy of up to Rs100 per MT for the crushing season 2019-20; establishment of mega food parks across districts under Pradhan Mantri Kisan Sampada Yojana scheme; construction of two 60 MLD desalination plants in Ramanathapuram and Villupuram districts at a total cost of Rs3,041 crore; for the Chennai-Kanyakumari Industrial Corridor project, a loan assistance of the Asian Development Bank is being obtained to strengthen 655 km of road at a total cost of Rs6,448 crore; to strengthen the transmission connectivity along the proposed Chennai-Kanyakumari Industrial Corridor, the 765 KV and 400 KV networks will be upgraded at a total investment of Rs4,650 crore with $451 million support from ADB.