Tamil Nadu Finance Minister Palanivel Thiaga Rajan said on Wednesday that the State’s capital expenditure will more than triple over the next three years as revenue and fiscal deficit indicators are “well under control.”

“The trajectory that we have is, either next year or the year after, we will meet the revenue-neutral target of the Fiscal Responsibility and Budget Management (FRBM) Act. If we do that, and the economy stays the way it is, then our capex is going to grow 2-3X in a period of three years,” Rajan said in his inaugural address at the 12th TN Finance Conclave organised by the Confederation of Indian Industry. He added that from ₹25,000 crore a year currently, the State’s capex will go to ₹90,000-95,000 crore.

ERODED CAPACITY

“There were times when Tamil Nadu’s capex was 3.5-4 per cent of gross state domestic product but that dropped continuously since 2014, reaching one per cent during the Covid-19 pandemic.” He said that last year the capex improved to 1.5 per cent of GSDP and the government is targeting 2.5-3 per cent this year.

The public-private partnership model is better for some projects as the State can benefit from the execution expertise of the private sector, besides joint investments. “But we are not here to build things and sell to them because we need money.”

Rajan said that despite coming to power in the midst of a brutal second wave of the pandemic, the government was able to quickly contain the fiscal and revenue deficits. After eight years of increasing revenue deficits, it brought down to ₹16,000 crore and, consequently, fiscal deficit as a percentage of GSDP has also dropped to 3.38 per cent, which is within the 3.85 per cent target set by the Union government. The low fiscal deficit also allows the State to roll over the borrowing capacity from last year to this year, as per the terms of the 15th Finance Commission.

He said, overall, Tamil Nadu is an above 100 per cent credit-to-deposit state, which means every rupee taken as deposit is extended as credit.

ROLE OF FINTECHS

But while banks meet credit targets, they lag in the number of industries or clients covered. Banks must bring in more people into the fold.

“Emerging players like fintechs offer a huge opportunity in these areas,” he said.

RECESSION WORRY

On the economic outlook, Rajan said, “We are now seeing unprecedented inflation because we are having the combined effect of a few trillion dollars of fiscal stimulus and $8 trillion of excess liquidity.”

The State has taken appropriate fiscal measures and, even if there is a global recession, Tamil Nadu will still perform better and be protected from the downsides than most other States.