On Friday, Tamil Nadu presented its state finance budget, emphasizing initiatives for women empowerment, higher education, and improvements to infrastructure, particularly in transportation and drinking water systems.
The budget estimates a real Gross State Domestic Product (GSDP) growth of 9 percent and a nominal GSDP growth of 14.5 percent for the fiscal year 2025 (FY25).
The government reiterated its commitment to fiscal consolidation, indicating a reduction in the revised fiscal deficit for FY25 by ₹6,992 crore, bringing it down to ₹1,01,698 crore (3.26 percent of GDP), compared to the originally projected ₹1,08,690 crore (3.44 percent). The fiscal deficit for FY26 is estimated at ₹1,06,963 crore, which is approximately 3 percent of GDP.
For FY26, the state has ambitious capital expenditure (capex) plans, targeting a 22 percent increase in capex to reach ₹57,230.96 crore. This comes despite a slight shortfall in FY25, where the revised capex estimate stands at ₹46,766.03 crore, down from an initial budget of ₹47,681 crore.
The budgeted revenue receipts for FY26, including transfers from the central government, are set at ₹3,31,568.76 crore—reflecting a 12.8 percent increase from the revised revenue estimates of ₹2,93,906.41 crore for FY25. Meanwhile, revenue expenditure is projected at ₹3,73,203.69 crore for FY26, representing a 9.65 percent rise over the previous fiscal year’s revised figures.
The revised revenue deficit for FY25 is expected to decline to ₹46,467 crore, down from an earlier estimate of ₹49,279 crore. This improvement is attributed to effective fiscal management, according to Tamil Nadu’s finance minister, Thangam Thennarasu. The revenue deficit for FY26 is projected to further decrease to ₹41,635 crore, about 1.17 percent of GDP.
The state anticipates a 14.6 percent increase in its Own Tax Revenue (SOTR) for FY26 compared to revised estimates for FY25, which stood at ₹1,92,752.43 crore. Finance Secretary T. Udhayachandran, IAS, noted that while there has been brisk growth in stamp duty, GST, and motor vehicle taxes, the growth in Value Added Tax (VAT) from fuel and liquor has remained slow.
Regarding debt management, which has been a persistent challenge for the state, the finance secretary emphasized assessing it through the Debt to GDP ratio lens.
The estimated outstanding debt to GSDP ratio for FY25 is projected to slightly increase to 26.43 percent, compared to the previous estimate of 26.41 percent. However, it is expected to decrease to 26.07 percent of GSDP in FY26.
Among the significant announcements, the state government will restore the Earned Leave Surrender system for state employees and teachers starting April 1, 2026, a program that was suspended during the COVID-19 pandemic and is expected to benefit over 900,000 employees.
Additionally, to support women empowerment, the registration fee for all immovable assets—including houses, plots, and agricultural land—valued at up to ₹10 lakh will be reduced by one percent when registered in the name of women, effective April 1, 2025.
Over the next two years, 20 lakh college students will also receive a tablet or laptop based on their preference.
