Team TOI
The prevailing cold relationship with the Centre notwithstanding, the state did not show any signs of discomfort on the financial front in its Budget for 2025-26. Tamil Nadu managed to reduce revenue expenditure and revenue deficit and to limit fiscal deficit to 3.26% for 2024-25. Moreover, it has projected a growth of 9.65% for its revenue expenditure to 3.73 lakh crore in 2025-26 and aims to bring down revenue deficit to 41,635 crore from ₹46,468 crore and limit it to 3% of GSDP, as per the prescribed norm.
“GST growth and frugal management of available funds,” said state finance secretary T Udhayachandran, explaining the salient features of the budget to the media. The state expects a 22.74% growth in GST revenue (a major component of state’s own tax revenue), besides a 14.44% revenue growth from stamp duty and registration fees, a 12% growth in motor vehicle tax revenue and a 7.37% growth in revenue from sales tax/VAT. “Surprisingly, the sale of petroleum products is down and this is a general trend across a few other states in the region,” he added.
If the Centre had off late adopted the ‘just in time’ concept in releasing funds to the states, the Tamil Nadu govt has done the same in release of funds to various departments, as against one-time allocation soon after the state budget. “We also discovered funds to the tune of around 11,000 crore lying idle with various departments. In addition, the unbundling exercise of some of the state enterprises including Power Finance Corporation helped tide over financial hurdles,” Udhayachandran said.
Frugal management of the state’s funds has also resulted in borrowings being lower by 3,600 crore in 2024-25 and they are targeted to dip by ₹7,000 crore in 2025-26. He expected the offer to reduce registration fees by 1% for women to lead to more registrations by them. Registrations in the name of women alone was at 30% of the total now.
“Growth of any state is dictated by global trends these days. For instance, revenue and tax collections from Tirupur were low for some time since the industry was not doing well. But after the recent developments in Bangladesh, Tirupur started doing well and revenue and tax collections are up,” he said. TN would do well by focusing on manmade fibres and technical textiles for growth, as the case would be with non-leather footwear for backward districts and high-end jobs and global capability centres for cities such as Chennai and Hosur.
But the digital economy has emerged as a grey area for the state in tracking payments for tax revenues, since companies are headquartered somewhere, while products are ordered and services availed of from TN. “We want to observe and study the digital economy more carefully,” to plug possible revenue leaks, Udhayachandran said.