Chennai: The TVK govt has sought to present its budget as the first step in a multi-year fiscal repair exercise, betting that a combination of stronger revenue mobilisation and tighter spending discipline can gradually restore the state’s finances without sacrificing the govt’s welfare commitments.And on top of the agenda to bring in more revenue are liquor sales, better GST compliance and closer scrutiny of capital projects.The 2026-27 Tamil Nadu budget retains a fiscal deficit at 3% of GSDP despite higher revenue expenditure. It bets on stronger revenue growth to absorb the increase while narrowing the revenue deficit.“The government envisages growth to overcome the deficit in two years with the help of clean, transparent and better governance,” said state finance minister N Marie Wilson in his budget speech.At the heart of the phased strategy is an attempt to create fiscal space without resorting to steep tax increases or sharp cuts in public spending. Finance secretary M A Siddique said the government has already created around ₹15,000 crore of additional fiscal space through a mix of revenue-enhancing measures and expenditure optimisation, providing room to fund new initiatives while keeping borrowing within prescribed limits.Around ₹2,000 crore has already been realised through various initiatives. Further gains are expected from revisions in liquor pricing, with the government projecting higher liquor revenue through state excise and VAT at about ₹56,000 crore in FY27 compared to ₹51,000 crore in FY26.It plans to correct long-standing anomalies in property guideline values while improving tax administration efficiency. He said faceless GST assessments, audits and scrutiny, coupled with improved compliance, could generate an additional ₹4,000-5,000 crore besides a GST growth of about 12%.On the expenditure side, better procurement practices and tight scrutiny of projects have improved the quality of public expenditure, enabling the state to undertake more work with the same allocation. Efficiency gains that yielded savings of about ₹5,000 crore last year are expected to rise further this year.Explaining the marginally lower capital expenditure compared with interim budget projections, Siddique said it reflected efficiency improvement.Borrowing, meanwhile, remains substantial, albeit within the Centre’s prescribed ceiling. The objective is not to stop borrowing but to ensure that revenue grows faster than debt. On that basis, the debt-to-GSDP ratio is projected to decline gradually from around 28% to about 27% in FY27 and further in the following years, while the debt-to-revenue receipts ratio is expected to improve this year.The TVK government’s strategy of first rebuilding its financial capacity will depend on its ability to deliver the promised gains in tax administration, spending efficiency and revenue mobilisation over the next two years.
