Tamil Nadu Finance Minister D Jayakumar, Thursday presented a tax-free budget for the year 2017-18. The budget also expects an increase in revenue deficit during the period.
The budget estimated fiscal deficit of 2.79 per cent of the GSDP in 2017-18 and this is further expected to increase to a fiscal deficit of 3.17 per cent in 2018-19 and 2.80 per cent in 2019-20.
In absolute terms the fiscal deficit would be Rs 41,976.78 crore for 2017-18, and Rs 53,586.28 crore in 2018-19 and Rs 53161.96 crore in 2019-20.
"Fiscal deficit for 2016-17 is estimated at Rs 61,341 crore in the revised estimates 2016-17 as against the budget estimation of Rs 40,534 crore and this is 4.58 per cent of the GSDP, breaching the norm prescribed in the TNFRA. This breach in FRBM norms is only due to TANGEDCO's debt take over and is termporary," said Jayakumar.
As part of joining the Ujwal DISCOM Assurance Yojana (UDAY), the financial turnaround and revival package for the state discoms, announced by the central government, out of Rs 30,420 crore debt of the Tamil Nadu Generation and Distribution Corporation, the state government has taken over 75 per cent of the debt i.e. Rs 22,815 crore and bonds are being floated in the open market to repay this debt.The centre has given an exemption from the FRBM norms for the states which has joined the scheme, for a year, said a senior official from the State.
Fiscal deficit for 2017-18 is expected to come down to less than three per cent of the GSDP, he added. However, the implementation of the seventh pay commission recommendations based on the report of the officials committee will increase the burden on State's finances for a year or two.
Revenue deficit is expected to Rs 15,930.35 crore in 2017-18 as compared to Rs 15,459.27 crore in 2016-17. In 2018-19, this is expected to increase to Rs 25,334.85 crore and by 2019-20 this is expected to come down to Rs 21,922.30 crore.
While the government was able to contain the decline in deficit, four factors contributed to the growth in the deficit, said State Finance Secretary.
As far as GSDP concerned, the state expects it will stand at Rs 15,51,500 crore in 2017-18 as compared to Rs 13,38,768 crore in 2016-17.
The economy is slowly picking up which is evident from the increase in GSDP reate in real terms from 4.85 per cent in 2012-13 to 7.94 per cent in 2016-17.
However, there is a significant fall in the growth of the state's own tax revenue, especially due to the fall in the stamps and registration, which has negatively impacted the revenue receipts.
Further, the decrease in share of Central Taxes due to Fourteenth Finance Commissions's recommendations and the increase in State's share in Centrally Sponsored schemes have also hampered the State Finances, said the Additional Chief Secretary to Government, finance department, K Shanmugam. The Centre's share of around Rs 6,000 crore has not been released so far, he said. The government is taking efforts to get this amount released.
Besides, the government is also looking at various ways to increase the State's revenue, such as from mining, he added. The closure of TASMAC liqour outlets has resulted in a drop of Rs 2,100 crore, including Rs 1,600 crore in sales tax, so far. The government has ordered closure of 1,000 liqour shops so far. The increase in fuel taxes has resulted in an increase of Rs 2,000 crore in the state's revenue.
The tax realisation in commercial taxes is expected to improve due to the revision of tax rates on petrol and diesel. The trends in expenditure are steady except for the hike in salaries and pensions due to implementation of Seventh Central Pay Commission recommendations based on the report of official committee constituted for this purpose, said Jayakumar.
In spite of these constrains on Revenue Receipts, the overall Fiscal deficit, net borrowings and outsanding debt-GSDP ratio will be within the permissible limits except Fiscal Deficit during 2018-19, said Jayakumar.
"The state Government will continue to take concerted efforts for faster economic recovery which will pave way for enhancing the State's fiscal position and improve the fiscal consolidation," said Jayakumar.
The outstanding debt including provident fund will be Rs 3,14,366 crore as on March 31, 2018, and will constitute only 20.90 pe cent of GSDP.