On Friday, March 14, the Dravida Munnetra Kazhagam (DMK) government, led by Chief Minister MK Stalin, unveiled a budget that addresses the needs of the majority of the population in advance of the important Tamil Nadu Assembly elections that are scheduled for next year. The DMK government’s major flagship programs for infrastructure, education, and women’s empowerment are the main focus of the budget.
The state government has also emphasized the “gross injustice” done to the state amid the escalating dispute between the Union government and Tamil Nadu over the National Education Policy and the three-language policy.
During his budget speech, Finance Minister Thangam Thennarasu emphasized the Union government’s rejection of funding and stated that the grants-in-aid and central tax share had drastically decreased. The state finances have been severely strained, he said, by the denial of funds under the National Disaster Relief Fund (NDRF) for Cyclone Fengal, the withholding of funds under Samagra Shiksha, the release of only Rs276crore for two massive disasters in the form of Cyclone Michaung, and the unusual rainfall in southern districts. The financial support that the Union government gives to state governments for certain projects or programs, or in certain situations, to help fill budget gaps, is known as grants-in-aid.
The distribution of central taxes by the Union administration was criticized by the state government, which described it as a “gross injustice” to the state. According to the Minister, the state only gets 4% of central taxes, even though it accounts for 9% of the nation’s GDP and is home to 6% of its population. “The share in central taxes is estimated at Rs 58,022 crore in the Budget Estimates 2025-26, but it remains far lesser than what should accrue to the state, owing to the indiscriminate levy of cess and surcharges,” he further added.
The Finance Minister stated that the grants-in-aid for 2024–2025 were significantly lower than what was anticipated in the budget projections, amid the ongoing dispute between the Union government and Tamil Nadu over the distribution of Samagara Shiksha money. Additionally, he told the house that the Tamil Nadu government expects the whole amount of money owed to the state under the Samagra Shiksha to be released in the next year. “The grants-in-aid receivable from the Union government are estimated at Rs 23,834 crore in budget estimates 2025-26,” he added.
According to the Minister, the income deficit is expected to drop from Rs 49,279 crore in the budget estimates to Rs 46,467 crore in the revised estimates for 2024–2025 “on account of prudent fiscal management.” Despite a significant cutback in grants-in-aid from the Union government this year, he added, this is still feasible. Revenue deficit refers to when a government’s expenses are more than its income from taxes and other sources, leading to a shortfall.
The revised estimate refers to an updated financial estimate based on actual expenditure and income trends over the year, as opposed to the original budget. The budget estimate, on the other hand, is the government’s projected income and expenses for the future year, published at the beginning of the budget cycle.
According to him, the income gap is predicted to drop even more to Rs 41,635 crore in 2025–2026. Since 2015–16, when the revenue shortfall first surpassed 1% of GDP, the state’s finances have been becoming worse, eventually reaching 3.28% in 2020–21. “This government has been working tirelessly to reverse this declining trend, amidst all obstacles, and in the ensuing year, it is expected to bring down the Revenue Deficit to 1.17% of the GSDP, close to the ratio of 2015-16,” he said. A state’s gross state product (GSDP) is the total value of its annual production of goods and services.
