Tamil Nadu debt rises to 28.3% of GSDP, Finance Minister calls fiscal situation a 'man-made disaster'

Tamil Nadu's debt burden has increased over the past five years, with the state's debt-to-GSDP (Gross State Domestic Product) ratio reaching 28.3 per cent in 2025-26 (Revised Estimates), according to figures released in the State government's fiscal white paper.

Wilson described the state's fiscal situation as a "man-made disaster" and alleged administrative failure and corruption after releasing the government's White Paper on finances.

He said revenue generation and capital investment would be prioritised under the guidance of the Chief Minister, while assuring that welfare schemes would not be stopped.

Speaking to the reporters, Wilson said, "This is 100% a man-made disaster, administrative collapse and corruption that has led to this situation. Revenue generation is essential. Of course, capital investment is the next most important thing, which we are planning. Under the guidance of the Chief Minister, we will respond to you soon."

He also accused the opposition DMK of leaving financial challenges for future generations, adding that the party had focused on its own interests rather than long-term governance.

"Welfare schemes are the pride of Tamil Nadu; we will not stop any such thing. They (DMK) have left this situation to the next generation. They have not thought about the next generation. They have only thought about their own families. That is the problem," he further added.

Tamil Nadu Finance Minister has flagged major long-term fiscal and demographic challenges in the state, warning of rising pressure on public finances due to a rapidly ageing population and structural economic issues.

He said Tamil Nadu is set to become one of the fastest-ageing major states in India, with the share of senior citizens projected to rise from 10.6 per cent in 2011 to 18.2 per cent by 2031, and nearly 48 per cent of the population expected to be elderly by 2100.

The old-age dependency ratio is also expected to increase from 20.6 per cent in 2021 to 32.7 per cent by 2036, while the working-age population is projected to decline from 66.4 per cent in 2021 to 63.6 per cent by 2036.

Describing this as a "scissors effect", he said a shrinking tax base alongside rising welfare and healthcare obligations could widen the fiscal deficit and increase borrowing, potentially pushing the state towards a debt spiral if corrective measures are delayed.

Wilson also said the window for fiscal reforms is narrowing, warning that any delay could make long-term economic sustainability more difficult as the state transitions into an ageing society.

Listing post-COVID fiscal concerns, he said other states had largely completed fiscal corrections, while Tamil Nadu lagged due to multiple structural issues. These included the creation of new welfare commitments without matching revenue sources, such as free bus travel for women, cooperative crop loan waivers, higher education scholarships, and expanded social security programmes, with annual spending on such schemes rising to around Rs 25,000 crore by 2025-26.

He also pointed to delays in tax reforms, revenue leakages, issues in the Commercial Taxes Department, undervalued stamp duty guideline rates, lower excise revenue compared to other states, and losses in the mining sector.

Wilson further noted a decline in capital expenditure as a share of GSDP from 1.79 per cent in 2021-22 to 1.44 per cent in 2025-26, alongside financial stress in public sector enterprises, including rising subsidies in the power sector, expansion of state transport services without matching revenues, and increased borrowings by the Tamil Nadu Civil Supplies Corporation, whose working capital liabilities rose from about Rs 17,500 crore to Rs 27,181 crore.

He added that state guarantees and contingent liabilities have also increased, adding to fiscal pressure. (ANI)