Tamil Nadu fiscal strain

Tamil Nadu’s public finances are under acute pressure. State debt has surged to almost ₹10 lakh crore, putting the debt‑to‑GSDP ratio at roughly 28 %. In the first quarter of FY 2026‑27 the government raised ₹20,881 crore through bonds and paid ₹14,618 crore in interest, with welfare programmes – free electricity, food subsidies, cash support for women, health, education and pensions – consuming a large share of revenue. The state plans to borrow about ₹1.22 lakh crore this year, allocating nearly 23 % of total revenue expenditure to interest.

At the same time, Tamil Nadu’s provisional figures for FY 2025‑26 show tax collections 13 % below target and non‑tax revenue 29 % short, creating a projected fiscal gap of ₹41,635 crore that could rise to around ₹78,000 crore. Additional strains include a ₹6,000 crore loan waiver, expanded free‑electricity allocation and the shutdown of 717 liquor outlets, deepening the budget shortfall.