Tamil Nadu’s interim budget for 2026–27, presented in the State Assembly by DMK Finance Minister Thangam Thennarasu, projected a fiscal deficit of ₹1,21,949 crore and a revenue deficit of ₹48,696 crore, while estimating the State’s outstanding debt to reach ₹10,71,770 crore by 31 March 2027 – equivalent to 26.35% of Gross State Domestic Product (GSDP).
As per convention, the Finance Minister refrained from making new policy announcements, noting that a full-fledged budget for 2026–27 would be presented by the new government to be formed after the forthcoming Assembly elections.
Deficit Widens in Revised Estimates
Presenting the interim budget, Thennarasu said the fiscal deficit for the current financial year 2025–26 had risen to ₹1,24,007 crore in the revised estimates, accounting for 3.48% of GSDP.
The revenue deficit for 2025–26 widened sharply to ₹69,219 crore compared to the original estimate of ₹41,635 crore, reflecting mounting expenditure pressures and constrained revenue flows.
The Minister attributed the fiscal strain to multiple factors, including GST rate rationalisation, a reduction in the State’s share of Central taxes, withholding of funds under centrally sponsored schemes, and additional expenditure commitments linked to Union government policies.
These commitments include ₹15,877 crore allocated towards loss funding for Tamil Nadu Power Distribution Corporation Limited and ₹3,087 crore towards contributions to the Guarantee Redemption Fund.
Total Tamil Nadu Debt
2021–22 RE: ₹5.70 lakh crore
2025–26 RE: ₹9.52 lakh crore
Revenue and Tax Projections
For 2026-27, total revenue receipts are projected at ₹3,44,575 crore, marking an 11.26% increase over the revised estimates.
The State’s Own Tax Revenue is expected to reach ₹2,29,579 crore, reflecting a projected growth of 11.15%.
Expenditure Push Continues
Revenue expenditure for 2026-27 is estimated at ₹3,93,272 crore, representing a 3.79% increase over revised estimates.
Capital expenditure is projected to rise significantly by 15.78% to ₹59,562 crore, indicating the government’s continued emphasis on infrastructure creation and growth-oriented investments.
Among sectoral allocations, the government also announced that it would roll out a dedicated shipbuilding policy, with ₹4,282 crore earmarked for the industries sector in the interim budget presented ahead of the elections.
Borrowing and Debt Position
The State plans to borrow ₹1,79,809 crore during 2026-27, while repaying ₹60,413 crore of existing debt.
The government maintained that if ₹9,523 crore relating to the Chennai Metro Rail Phase-II project, which it argued should be accounted for under Union government books, is excluded, the debt-to-GSDP ratio would stand slightly lower at 26.12%.
Medium-Term Fiscal Outlook
According to the Medium Term Fiscal Plan annexed to the budget, Tamil Nadu projects a gradual fiscal consolidation path.
The fiscal deficit is expected to decline to 2.89% of GSDP in 2027–28 and further to 2.80% in 2028–29. The debt-to-GSDP ratio is also projected to moderate to 25.43% by 2028–29.
Source: The New Indian Express
Subscribe to our channels on WhatsApp, Telegram, Instagram and YouTube to get the best stories of the day delivered to you personally.
