Chennai: Unlike States such as Maharashtra, Karnataka and Gujarat, Tamil Nadu failed to consolidate its fiscal position in the post-COVID era, according to the TVK-led Government’s White Paper on the State’s public finances, which was released by Finance Minister N Marie Wilson in Chennai on Tuesday.
The White Paper, whose central focus is the five-year post-COVID window from 2021-22 to 2025-26, said during the post-pandemic recovery period, which created the conditions for fiscal consolidation, Tamil Nadu’s traditional peers Karnataka, Maharashtra and Gujarat used those conditions to restore their fiscal positions. But during this period the State’s own indicators “moved in the opposite direction”.
Tamil Nadu’s annual interest bill grew from Rs.41,564 crore in 2021-22 to Rs.67,050 crore in 2025-26 Pre-AC, a 61 per cent increase. Interest now consumes approximately 22.8 per cent of total revenue receipts and over 34.8 per cent of the State’s own-tax revenue — nearly one rupee in every four of revenue, committed before any allocation decision is made. “While the peer States maintain an Interest Payments / Total Revenue Receipts at a lower level, Tamil Nadu’s interest burden is highest among the peers, close to two times that of Gujarat and Maharashtra,” the paper said.
Overall, Tamil Nadu’s public finances have deteriorated sharply over the past five years, with the State’s debt burden doubling to ₹10 lakh crore and fiscal stress becoming increasingly structural rather than cyclical. Combined with guarantees and losses of State-owned enterprises, particularly in the power and transport sectors, Tamil Nadu’s total fiscal exposure is estimated at more than ₹13 lakh crore.
“The financial situation was no doubt bad five years ago, but it has become worse now,” State Finance Secretary M A Siddique told journalists to a question.
At the heart of the report is the finding that Tamil Nadu’s outstanding liabilities have risen from ₹5.13 lakh crore in 2020-21 to nearly ₹10 lakh crore by March 2026, with the debt-to-GSDP ratio remaining elevated at 28.3%. The State’s per capita liability has climbed to ₹1.29 lakh, the highest among the peer States examined.
The White Paper said the debt build-up has translated into a growing interest burden that now exceeds annual capital expenditure. “Interest payments have increased from ₹41,564 crore in 2021-22 to ₹67,050 crore in 2025-26, consuming nearly 23% of total revenue receipts. In practical terms, the State is now spending more servicing past borrowings than investing in new infrastructure and productive assets,” the Minister said during a presentation as part of the briefing.
Another major concern is the persistence of the revenue deficit. “The 2025-26 revenue deficit of ₹78,324 crore is the highest ever recorded by the State, surpassing even the pandemic year in absolute terms. The deficit is structural, Tamil Nadu is increasingly borrowing to finance routine expenditure rather than asset creation,” he added.
“With an ageing population expected to increase welfare and healthcare demands, the document argues that the window for corrective action is narrowing,” the Minister said. According to him, the new TVK government would focus on a combination of stronger revenue mobilisation, expenditure discipline, PSU reform through “clean, corruption-free governance” to restore fiscal sustainability.
