Tamil Nadu's Debt Projected to Surge to Rs 10.71 Lakh Crore by 2027
In a significant budget announcement, Tamil Nadu Finance Minister Thangam Thennarasu disclosed on Tuesday that the state's outstanding debt is estimated to reach Rs 10.71 lakh crore by March 2027. This projection was made during his interim budget speech for the financial year 2026-27, highlighting the fiscal challenges facing the state.
Budget Borrowing and Debt Breakdown
According to Thennarasu, the Tamil Nadu government plans to borrow a total of Rs 1.79 lakh crore in the upcoming financial year. This borrowing will be used to make repayments of Rs 60,413 crore, contributing to the overall debt accumulation. The minister clarified that this debt figure includes a pending amount of Rs 9,522 crore for the Chennai Metro Rail Phase-II project. Excluding this project-specific liability, the debt is estimated at Rs 10.62 lakh crore.
Despite the increase in absolute debt from Rs 9.52 lakh crore, the debt-to-GSDP ratio is expected to improve slightly, declining from 26.43% in 2025-26 to 26.12% in 2026-27. This indicates a relative stabilization in the state's debt burden compared to its economic output.
Rising Deficits and Central Government Blame
The budget speech also revealed concerning trends in the state's fiscal health. Both the revenue deficit and fiscal deficit have increased significantly. The revenue deficit, initially estimated at Rs 41,635 crore for 2025-26, has surged to Rs 69,219 crore. However, projections show a gradual reduction in the coming years, with estimates of Rs 48,696 crore in 2026-27, Rs 42,964 crore in 2027-28, and Rs 35,115 crore in 2028-29.
Similarly, the fiscal deficit, which was targeted at 3% of GSDP, has risen to 3.48% in revised estimates. Finance Minister Thennarasu assured that efforts are underway to bring this back to 3% in 2026-27, with further reductions to 2.89% in 2027-28 and 2.80% in 2028-29.
Thennarasu attributed the rise in deficits to policies of the BJP-led central government. He cited factors such as GST rate cuts, withholding of funds for centrally sponsored schemes, and increased expenditure due to funding losses for the Tamil Nadu Power Distribution Corporation Ltd (NPDCL) as key contributors to the fiscal strain.
Credit Economy and Future Targets
In a forward-looking move, the finance minister announced an ambitious target of lending Rs 11 lakh crore to priority sectors in the coming financial year. He emphasized the importance of credit in Tamil Nadu's economy, noting that it is nearly three times the size of the state budget. "Recognizing the catalytic role of credit, the government has decided to lend Rs 11 lakh crore," Thennarasu stated, underscoring the strategic focus on boosting economic activity through financial support.
However, the interim budget did not include any major new announcements, as the government adhered to its practice of avoiding significant policy changes in such budgets. This approach reflects a cautious stance ahead of the full budget presentation.
The budget details paint a complex picture of Tamil Nadu's fiscal landscape, balancing debt management with growth-oriented initiatives amidst ongoing challenges from central policies.
