Tamil Nadu Finance Minister D Jayakumar has not proposed any fresh levies in the 2017-18 Budget, which reveals the growing stress in the State’s finances from falling revenues and increasing expenditure.

At 4.58 per cent of the Gross State Domestic Product, the fiscal deficit of ₹61,341 crore in 2016-17 has breached the 3 per cent norm agreed upon under the Fiscal Responsibility and Budget Management (FRBM) Act. The government explained that this was because it had taken over ₹22,815-crore debt from the books of the power utility Tangedco under the Central scheme to reform the finances of power distribution companies.

If the debt taken over from Tangedco is excluded, the fiscal deficit in 2016-17 would be ₹38,526 crore, which is 2.88 per cent of GSDP. This is Jayakumar’s maiden Budget and also the first of the Edappadi Palaniswami government.

The State government had increased value added tax on petrol and diesel earlier this month. It now said that it had not revised the tax rates in view of the GST regime that is expected to come into force during the next financial year.

Revenue & expenditure Total revenue receipts are projected at ₹ 159,363 crore for 2017-18, while the revenue expenditure is estimated at ₹ 175,293 crore, leaving a ₹15,930-crore deficit.

Despite an increase in revenue expenditure, the revenue deficit for 2017-18 is maintained at the previous year’s level (₹ 15,459 crore).

This is mainly due to improvements in tax revenues that the State expects.

It has projected a fiscal deficit of ₹ 41,977 crore for 2017-18, against ₹ 61,341 crore in 2016-17.

The Centre has allowed the State to exceed the limit to the extent of debt taken over from Tangedco. It has also allowed the State to borrow beyond 3 per cent to absorb the burden of this debt.

Revenues took a hit to the tune of ₹2,100 crore during 2016-17 on account of closure of TASMAC shops.

By increasing VAT on petrol and diesel, the state expects an additional revenue of ₹ 2,000 crore. The government said VAT rates had not been revised since 2014-15.

Revenue through commercial taxes, which account for about 70 per cent of state’s revenues, has been estimated at ₹ 77,234 crore for 2017-2018. It was about ₹ 66,522 crore for 2016-2017.

Swelling debt The net outstanding debt will be ₹ 3,14,366 crore, including the debt taken over from Tangedco at the end of March 31, 2018. The state’s borrowings to meet the revenue shortfall and support capital expenditure are estimated at ₹ 41,977 crore for 2017-18

Interest payments to service the debt havebeen estimated at ₹25,982 crore, which is 14.82 per cent of the total revenue expenditure.

Subsidies and grants The total subsidy and grants is expected to be ₹72,615.76 crore against ₹68,211.05 crore estimated last year.

GSDP is forecast at 7.94 per cent at constant prices during 2016-2017. With improving sentiments, the economic growth is pegged at 9 per cent for the year 2017-2018.

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