Fiscal deficit breaches 4% of GSDP

Now, the State should undertake power sector reforms

The revised Budget for 2021-22 estimated a fiscal deficit (the difference between total revenue and expenditure) of ₹92,529.43 crore, which amounts to 4.33% of the Gross State Domestic Product (GSDP), over and above the 4% ceiling permitted by the 15th Finance Commission for the States. The revised fiscal deficit is also wider than the ₹84,202.39 crore projected in the interim Budget. A State borrows to fund its fiscal deficit. The 15th Finance Commission has allowed the States to borrow up to 4% of their GSDP for FY22. However, it has allowed the States to borrow additional 0.5%, provided they undertake reforms in the power sector. And one of the reforms is the introduction of direct benefit transfer to all farmers. Now, Tamil Nadu has to undertake the reforms to go for the additional borrowing. “Though this government opposes the use of Article 293(3) of the Constitution to place conditions on borrowings by the States, we have studied the guidelines received from the Union government. We are confident that Tamil Nadu will be able to avail itself of 0.35% of the 0.5% of the GSDP additional borrowing allocation made for power sector reforms, without compromising on free electricity supply to the farm sector,” Finance Minister Palanivel Thiaga Rajan said in his speech.