Like any other political party TVK also promised a slew of welfare measures. Key among them include Rs 2500 monthly support for women heads of families and unemployment aid. The white paper released in June once again highlighted the collapse in revenue generation, spiraling debt, increasing fixed expenditure commitments and mounting liabilities in public sector enterprises. More importantly, it also gave hints about what is in store in the maiden budget.
Usually, the first budget of any government contains a slew of populist measures. But this time it might be different, as the white paper stated that the fiscal space available for taking up new programmes can only be very minimal. The 2026-27 revenue deficit could reach roughly Rs 90,500 crore against about Rs 48,696 crore shown in the interim budget and the fiscal deficit could approach Rs 1.64 lakh crore against the Rs 1.22 lakh crore budgeted.
The major contributors to the debt are the power, transport and civil supplies sectors, where public interest is involved. The sectors account for Rs 3.18 lakh crore out of the total debt of Rs 10 lakh crore. Economists reckon that the state’s debt should not be measured in absolute terms, but in terms of its proportion to the State Gross Domestic Product. On that metric Tamil Nadu is relatively in a better shape. However, the overall fiscal math needs a fix.
The white paper noted that the way forward is challenging but not hopeless: plugging revenue loss and corruption in revenue-collecting departments, reducing the cost of goods and works, and mobilising additional resources without imposing fresh burdens on citizens. The problems and the fix identified are nothing new. The white paper released by the previous DMK regime in 2021 also came up with similar findings. Given the limited fiscal space, the state budget would be keenly watched for its commentary on how it plans to address the gaps identified in the white paper. These gaps need to be addressed over midnight measures.
One advantage TVK has is that it does not carry legacy baggage like the two major Dravidian parties. So, it can set in motion a reform process to fix the finances. That needs a firm political will. Given that it is a coalition government and there are compulsions relating to upcoming byelections and local body elections, one has to see how much leeway TVK has to carry out the reforms.