With the exact impact of the COVID-19 pandemic on Nadus economy yet to be known this year, the State Government may have to increase its borrowings for managing its fiscal Health.
According to the 15th Finance Commissions recommendations, the Fiscal Deficit has to be within 4% of the Gross State Domestic Product (GSDP) for 2021-22. If the State government goes beyond its planned borrowings, the fiscal deficit is bound to go up, for which it has to seek the Centres approval. As per the Interim Budget presented by the previous AIADMK regime in February, the plan was to borrow 84,686.75 crore, by keeping the fiscal deficit at 3.94% of GSDP.
Under normal circumstances, there will be a certain amount of increase in revenue even in the absence of a hike in taxes or charges. But with the second wave of the pandemic, a fall in revenue looks imminent. For example, as per the Budget Estimates worked out by the government prior to the outbreak of the pandemic in March 2020, the SOTR for 2020-21 was expected to be about 1.34 lakh crore. [It was later revised to 1.09 lakh crore].
As per a provisional estimate, the revenue netted last year was about 1.06 lakh crore. This meant that the gap was about 28,000 crore. It remains to be seen whether the State would see a similar drop in revenue this year as well if the pandemic continues.