On March 16, Tamil Nadu Finance Minister D Jayakumar will be presenting the state budget at the assembly, and if experts are to be believed, then the state finance looks grim. This means the state will have to look for centre’s help to get it out of the sticky situation.


According to a leading daily report, the revenue deficit of Tamil Nadu budget may cross ₹16,000 crore, and the fiscal deficit will be ₹40,000 crore. The drought-hit state also immediately requires an assistance of ₹40,000 to tackle the crisis.


The reason behind the increasing revenue deficit is decreasing income and growing expenses, the Times of India quoted National Institute of Public Finance and Policy Professor N R Bhanumurthy as saying.


In past five years, Tamil Nadu became one of the states suffering from revenue deficit and bad fiscal management. The situation further worsened after Jayalalithaa’s conviction in September 2014 in the disproportionate assets case. In past couple of years, the state government is failing in achieving its revenue targets and each year the set target is higher, the professor added.


However, the current drought situation may bring some respite for the finances if the central government releases special grants for Tamil Nadu. The state government can divert some of the grants to manage their revenue deficit. 


Experts speculate that revenue leakages in registration department and commercial tax if fixed can increase the state revenue. The TN commercial tax department has hardly conducts any raid like the IT department and central excise departments and this is indicative of the fact that no serious measures have been taken to detect the revenue leakage, the report quoted an economics professor R Srinivasan of Madras University as saying. 


In short, if the Tamil Nadu government fails to increase its revenue then soon it will force the state to be heavily dependent on centre’s mercy.