Tamil Nadu is estimated to see a fourth straight year of revenue deficit on the basis of the revised budget proposed for the financial year 2016-17 presented by the state finance minister O. Panneerselvam on Thursday.
The J Jayalalithaa-led AIADMK government presented its first budget after it was swept to power — during the recently-held assembly polls in May — for a second straight term, a record after 32 years.
The state is experiencing a strain on its financial resources after it made a huge provision for revising salaries and allowances of state government employees and pensioners. There are about 18 lakh government employees in the state.
"In the FY17 budget, expenditure on salaries and pension are budgeted to grow by 30 percent and 35 percent respectively... The state finances are affected by increasing committed expenditure on four key items – salaries, pension, subsidies and interest – which alone account for 93.8 percent of revenue expenditure," India Ratings and Research (Ind-Ra) said in an update on Thursday.
"The revenue expenditure on these four sub-heads alone is budgeted at 110.7 percent of the FY17 revenue receipts," the credit ratings agency belonging to the Fitch Group added.
In April, the state, just a month before the assembly polls, raised dearness allowance (DA) for its employees to 119 percent (from 113 percent), entailing an outgo of about Rs. 4,600 crore. The hike was effective from January this year.
This was even as the Central government is yet to decide on implementing wake hike as recommended by the 7th Central Pay Commission. Several states are waiting for cues from the Modi government to implement wage revision in their respective states.
State GDP
The state's economic growth rate (GSDP growth rate) came at 8.79 percent, higher than the overall Indian GDP growth rate of 7.6 percent for the financial year 2015-16. This, along with Tamil Nadu's relatively lower debt-to-GSDP ratio at 18.43 percent, according to the budget estimates, augurs well for the state, Ind-Ra said.
Big infra push
The state's overall infrastructure push comes in the form of new allocation for roads this year. The budget allocates Rs. 2,700 crore for maintaining roads under the Comprehensive Road Infrastructure Development Programme. In a related development, Tamil Nadu will buy 3,000 new buses.
Chennai is a big beneficiary of the 2016-17 budget, with the city's civic body — the Chennai Municipal Corporation — getting Rs. 800 crore to improve infrastructure in the city. Besides, senior citizens of the city will get 2.49 lakh free bus passes.
Investor meet on cards
The Tamil Nadu government will host an Investors Forum next year, ostensibly aimed at attracting investments, on the lines of similar initiatives taken by neighbouring states like Karnataka.
The state is expected to end the fiscal with a revenue deficit of Rs. 15,854 crore, while revenues from sale of liquor has been pegged at Rs. 6,636 crore.
