On August 13, 2021, Tamil Nadu's Finance Minister, Dr. Palanivel Thiagarajan, presented the state's budget for the fiscal year 2021-22. It should be noted that, due to the impact of COVID-19, the economy and government finances did not play as expected in 2020-21. The budget assumptions for 2021-22 have been compared to the actuals for 2019-20 in this note (in terms of compounded annual growth rate or CAGR). The improved projections for 2020-21 and budget estimates for 2021-22 are analyzed in the Annexure.
Highlights of the budget
Tamil Nadu's Gross State Domestic Product (GSDP) is expected to reach Rs 21,36,351 crore in 2021-22 (at current prices), representing an annualized growth of 7.6% over the GSDP in 2019-20. According to updated forecasts, GSDP is expected to grow by 5.3 % in 2020-21, compared to 2019-20. (budget estimate was 13.3 %).
The total spending for 2021-22 is expected to be Rs 3,29,035 crore, up 12.9 % on an annualized basis from the actual expenditure in 2019-20. Total expenditure for 2020-21 is expected to be Rs 3,06,917 crore, 2.2 % more than the budget projection, according to updated estimates.
Total collections (excluding borrowings) are expected to reach Rs 2,08,553 crore in 2021-22, representing a 7.7% annual growth over 2019-20. Total collections (excluding borrowings) are expected to fall Rs 38,675 crore short of the budget projection in 2020-21. (17.2 %).
In 2021-22, the revenue shortfall is expected to be Rs 58,693 crore (2.8 % of GSDP). The revised revenue shortfall for 2020-21 is expected to reach 3.4 % of GSDP, substantially higher than the budget forecast (1.0 %).
The fiscal deficit is expected to be Rs 92,529 crore in 2021-22. (4.3 % of GSDP). The fiscal deficit is expected to reach 5.0 % of GSDP in 2020-21 (updated estimate), substantially higher than the budget forecast of 2.8 %.
Highlights of Tax and Policy
Petrol tax: The petrol tax would be cut by three rupees per liter. The tax decrease is expected to cost the government Rs 1,160 crore per year in income.
Housing for the poor: In the next five years, over eight lakh houseless households in rural regions would be given a home.
Social security pension: The scheme's implementation will be modernized, and its coverage will be increased to all qualified recipients.
Urban employment: To offer meaningful work to the urban poor, a wage employment system will be introduced on a trial basis. For this initiative, an initial allocation of Rs 100 crore has been announced.
Economy of Tamil Nadu
GSDP: The GSDP of Tamil Nadu is expected to rise by 1.4 % over the previous year (at constant prices) in 2020-21. India's GDP is expected to decline by 7.3 % in 2020-21, in contrast.
Agriculture, manufacturing, and services are expected to contribute 12 %, 37 %, and 51 % of the GDP, respectively, in 2020-21. In 2020-21, these industries are expected to expand by 4.8 %, 0.4 %, and 1.1 %, respectively.
Per capita GSDP: In 2020-21, Tamil Nadu's per capita GSDP (at constant prices) is expected to be Rs 1,70,043 (up 1% from 2019-20).
Unemployment: The unemployment rate in Tamil Nadu was 5.3 % in the Periodic Labour Force Survey 2019-2020, higher than the national figure of 4.8 %.
Figure 1: At constant prices, GSDP and sector growth in Tamil Nadu (2011-12)
It's worth noting that agriculture includes mining. Figures are in constant values for 2011-12, which means they have been adjusted for inflation.
Sources: Ministry of Statistics
Estimates Budget for the year 2021-2022
The total budget for 2021-22 is expected to be Rs 3,29,035 crore. This is a 13% yearly increase above the actual spending in 2019-20. This cost would be covered by Rs 2,08,553 crore in revenues (other than borrowings) and Rs 1,18,250 crore in gross borrowings.
Total receipts (excluding borrowings) are anticipated to grow by 8% annually in 2021-22 compared to actual receipts in 2019-20.
Receipts (other than borrowings) are expected to be 17 % lower than the budget projection in 2020-21, according to the updated estimate. In comparison, total spending is expected to be 2% more than anticipated. Borrowings are expected to be 47% more than projected in the budget.
The fiscal deficit is expected to be 4.33 % of GDP (Rs 92,529 crore) in 2021-22, with a revenue shortfall of 2.75 % of GDP (Rs 58,693 crore). At the revised stage, the revenue shortfall for 2020-21 is expected to be 3.40 % of GSDP (Rs 65,994 crore), which is substantially larger than the budget projection of 1.03 % of GSDP. At the revised stage, the fiscal deficit for 2020-21 is expected to reach 4.99 % of GSDP (Rs 96,890 crore), compared to 2.84 % in the budget projection.
Expenditure for the year 2021-2022
The projected capital expenditure for 2021-22 is Rs 67,846 crore, a 19 % increase over the actual capital expenditure in 2019-20.
Capital expenditure refers to spending that affects the state's assets and obligations, such as (i) capital outlay, or spending those results in the development of assets (such bridges and hospitals), and (ii) debt repayment and loan grants by the state government. The capital outlay for 2021-22 is expected to be Rs 42,181 crore, a 28 % increase over 2019-2020.
Capital spending in 2020-21 is expected to be 4% more than projected in the budget.
The anticipated revenue expenditure for 2021-22 is Rs 2,61,189 crore, an increase of 11% over 2019-2020. Salaries, pensions, and interest payments are all included in this category.
Revenue expenditures are expected to be 2% more than the budget projection in 2020-2021.