Tamil Nadu could not eliminate the revenue deficit, which has been on an increasing trend during the five year period between 2016-17 to 2020-2021. It increased by 380.76 per cent during the five year period from ₹12,964 crore in 2016-17 to ₹62,326 crore in 2020-21, according to the State Finance Audit Report of the Comptroller and Auditor General of India tabled in the Assembly on Wednesday.
The State was successful in containing fiscal deficit below 3 per cent of GSDP in three out of the five years. The ratio during 2019-20 was 3.35 per cent and stood at 4.90 per cent during 2020-21. The fiscal deficit grew by 56.17 per cent over the previous year and stood at ₹93.983 crore during the current year.
The outstanding fiscal liabilities increased by 22.43 per cent from ₹4,23,743 crore at the end of 2019-20 to ₹5,18,796 crore at the end of 2020-21. The effective increase is by 20.96 per cent considering the exclusion of back-to-back loans of ₹6,241 crore received in lieu of GST compensation from Government of India, the report said.
Wrong classification
Subsidies consumed 14.42 per cent of the State’s revenue receipts. The expenditure of subsidies increased by 24.65 per cent from ₹20,144 crore during 2019-20 to ₹25,110 crore in the next fiscal.
Implicit subsidies in the form of marriage assistance, maternity assistance, free supply of laptop and uniform increased by ₹6,746 crore during 2020-21 over the previous year. This is due to disbursement of cash-to-rice family cardholders to the tune of ₹7,903 crore to tackle the Covid lockdown, which was wrongly classified as Grants-in-Aid instead of subsidies, the report said.
Increased borrowings
Liabilities increased by 21.29 per cent compared to the previous year due to increase in market borrowings under internal debt (21.87 per cent), loans and advances from the Centre (53.08 per cent) and deposits under public account (29.62 per cent) during the 2020-21. This was due to increased borrowings to meet the increase in revenue deficit and increase in capital expenditure during the year.
Existence of revenue deficit is a cause of concern as the revenue receipts were not able to meet the revenue expenditure. Moreover, a part of capital receipts was utilised to meet the revenue expenditure, reducing availability of capital resources to that extent for creation of capital assets.
Measures needed
The ratio of fiscal deficit to GSDP during the year 2020-21 stood at 4.94 per cent, indicating that achieving the target of the ratio of 3 per cent by March 31, 2022 as envisaged by the Tamil Nadu Fiscal Responsibility Act, 2003 (TNFR act) would not be possible.
The ratio of total outstanding debt to GSDP was 26.94 per cent at the end of 2020-21, which was much higher than the 25.20 target envisaged in the TNFR act. The back-to-back load of ₹6.241 crore received from the Centre in lieu of GST compensation was not considered as debt for working out the indicator, the report said.
The CAG recommended that the State government initiate measures for creating increased fiscal space through augmenting own revenues to avoid utilisation of capital receipts (borrowings) to meet revenue expenditure, thereby moving towards achieving the target set in the TNFR Act.