TN borrows more for everyday operations, not for infra creation: CAG

CHENNAI: Tamil Nadu spends only 31% of the total borrowings for capital expenditure and the borrowed funds are being used mainly for meeting current consumption (paying salaries and others) and repayment of borrowings instead of asset creation and development activities, as per the Report of the Comptroller and Auditor General of India on State finances for 2023-24, which was tabled in the State assembly on Friday.

The state had outstanding debts and liabilities including Off Budget Borrowing (OBB) that are loans taken by public sector undertakings and special purpose vehicles) of Rs 7.62 lakh crore.

Pointing out that the continuous mismatch between receipts and expenditure indicates rising fiscal stress, the report highlighted that the revenue deficit increased from Rs 36,215 crore to Rs 45,121 crore registering 24.59% increase over 2022-23, while fiscal deficit increased significantly from Rs 81,886 crore in 2022-23 to Rs 90,430 crore in 2023-24 increasing by 10.43%.

“Between 2019-20 and 2023-24, revenue expenditure (spending on day-to-day operations) increased from Rs 2,10,435 crore (12.07% of GSDP) to Rs 3,09,718 crore (11.38% of GSDP). It consistently made up a significant portion (85.68% to 87.65%) of the total expenditure during this period, growing at an average annual rate of 86.46%,” the report explained.

On the other hand, the government spent only Rs 40,500 crore as capital expenditure in 2023-24, which was 11.28% of the total expenditure during the year.

Even though experiencing fiscal stress, there is an increasing trend of subsidies, which increased from Rs 20,144 crore in 2019-20 to Rs 37,749 crore in 2023-24, which was from 9.57% of the total revenue expenditure in 2019-20 to 12.19% in 2023-24. Apart from this, the State government also spent Rs 801.77 crore on implicit subsidies (unexpected assistance to loss making entities).

As per the Debt Stabilisation Analysis, the overall debt of the state government has grown on an average at the rate of 15.62% annually between 2019-20 to 2023-24. Also, Debt-GSDP ratio (total debt relative to total economic output) has increased from 24.35% in 2019-20 to 28% in 2023-24.

As per the Tamil Nadu Fiscal Responsibility Act, revenue deficit should be eliminated by 2025-26. Though Revenue Deficit had decreased during 2022-23, it increased substantially by 24.59% during 2023-24. The trend of Revenue Deficit for the last five years indicates that the State may not adhere to the TNFR target of eliminating revenue deficit by 2025-26, the report pointed out.

The fiscal deficit as a percentage of GSDP during 2023-24 stood at 3.32%, which was higher than the target of 3% as set under the TNFR Act.