Tamil Nadu’s interim budget: State's debt to touch Rs 10.71 lakh crore by March 2027; govt plans Rs 1.79 lakh crore borrowing, targets deficit reduction

CHENNAI: State finance minister Thangam Thennarasu said on Tuesday that the outstanding debt of the Tamil Nadu govt for 2026-27 is estimated at Rs 10.71 lakh crore by March, 2027.

In his interim budget speech, Thangam Thennarasu said the Tamil Nadu govt plans to borrow a total amount of Rs 1.79 lakh crore for the financial year 2026-27 and to make repayment of Rs 60,413 crore due to which the outstanding debt will be Rs 10.71 lakh crore. However, the debt includes Rs 9,522 crore pending amount for Chennai metro rail phase-II project and excluding the amount the debt will be estimated at Rs 10.62 lakh crore.


Though the debt is estimated to rise from Rs 9.52 lakh crore, the debt to GSDP ratio is estimated to go down from 26.43% in 2025-26 to 26.12% in 2026-27.

The state finance minister also said both the revenue deficit and the fiscal deficit have increased. While the estimated revenue deficit for 2025-26 was Rs 41,635 crore, it rose to Rs 69,219 crore. However, it is expected to reduce to Rs 48,696 in 2026-27 and further dip to Rs 42,964 and Rs 35,115 in 2027-28 and 2028-29, respectively.

Fiscal deficit, which was estimated at 3% of GSDP, rose to 3.48% in the revised estimates. Thangam Thennarasu assured that the fiscal deficit will be brought back to 3% of GSDP in 2026-27, 2.89% in 2027-28 and 2.80% in 2028-29.

The finance minister blamed the BJP govt at the centre for the increase in both the revenue and fiscal deficit saying that GST rate cuts, withholding of funds for centrally sponsored schemes, increase in expenditure for loss of funding to Tamil Nadu power distribution corporation ltd (NPDCL) and so on, have contributed for the rise in deficits.

Thangam Thennarasu announced an "ambitious yet achievable target" of lending Rs 11 lakh crore to priority sectors in the coming financial year. "In Tamil Nadu, the credit economy is nearly three times the size of the budget, underscoring its size and importance. Recognizing the catalytic role of the credit, the govt had decided to lend Rs 11 lakh crore," Thangam Thennarasu said.

However, there were no new significant announcements in the interim budget as govt said that it is not the habit to make new announcements in interim budgets.