On March 16, the Tamil Nadu Finance Minister D Jayakumar presented the state budget on the assembly and by the look of it; it seems that the coastal state is heading towards a financial meltdown. For the common man, the good news is there is no new tax, and the bad news is it is a revenue deficit budget. 

 

Presenting his maiden budget, the finance minister said that the state economy was "slowly picking up" but the "continuing sluggishness" of global and domestic economies and demonetisation has affected it "significantly".

 

While the Total Revenue Receipts (TRR) has been projected at ₹1,59,363 crore, revenue expenditure was estimated at ₹1,75,293 crore, "leaving the revenue deficit at ₹15,930 crore," he said. The increasing revenue deficit and the high borrowings to meet its expenditure are most likely to incur ₹26,000 crore interest payments in next year. 

 

The Tamil Nadu government is not taking any proactive measure to reduce the revenue deficit and currently, it is only relying on tax collections. However, the tax collection may not be sufficient measure to increasing the revenue, and the government needs to employ stricter measures for ensuring that the state finances do not become highly dependent on Centre. 

 

According to experts one of the methods to ensure the increase in revenue is cutting down on expenses on freebies in the form of various welfare schemes reported a leading national daily. In the last years, there is a sharp discrepancy between the revenue and expenditure of Tamil Nadu. This is indicative of the fact that the government is spending more than it can afford to.

 

Furthermore, once the Goods and Services Tax (GST) system rolls out, its impact may increase financial difficulties for Tamil Nadu. 

 

Meanwhile, Tamil Nadu Finance Secretary K Shanmugam pointed out that delay in fund release by the central government is a major reason for financial hindrance and that Tamil Nadu is to receive ₹5000 to ₹6000 from the centre. 

 

The Finance Secretary also pointed out that the government is continuing with the welfare schemes. Tamil Nadu happens to be one of the leading states in India when to have massive welfare schemes. These schemes require a sum of ₹6000 to ₹7000 every year, which is an additional expense as pointed by the finance secretary. 

 

Though the state government of Tamil Nadu is determined to continue with these expenditures but soon if it does not come up with effective measures to increase its revenue or lower its expenses, they the state might face serious financial meltdown.