Ahead of the crucial Tamil Nadu Assembly elections next year, the Dravida Munnetra Kazhagam (DMK) government led by Chief Minister MK Stalin, presented a budget addressing the needs of most sections of the society on Friday, March 14. The budget focuses on DMK government’s key flagship schemes aimed at empowering women, improving education, and infrastructure.
Amid the growing standoff between the Union government and Tamil Nadu over National Education Policy and three-language policy, the state government has also highlighted the “gross injustice” meted out to the state.
Delivering the budget speech, Finance Minister Thangam Thennarasu highlighted the denial of funds by the Union government and said that the grants-in-aid and share in central taxes have significantly reduced. He said that the withholding of funds under Samagra Shiksha, denial of funds under National Disaster Relief Fund (NDRF) for Cyclone Fengal, release of just Rs 276 crore for two massive disasters in the form of Cyclone Michaung and the unprecedented rainfall in southern districts, have all caused a severe strain on the state finances. Grants-in-aid is the financial assistance provided by the Union government to state governments for specific projects, schemes, or in some cases, to help cover budget shortfalls.
The state government criticised the Union government's allocation of central taxes, calling it a "gross injustice" to the state. Despite contributing 9% to the national economy and housing 6% of the country’s population, the state receives only a 4% share in central taxes, the Minister said. “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.
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Amid the ongoing row between the Union government and Tamil Nadu over release of Samagara Shiksha funds, the Finance Minister said that in the year 2024-25, the grants-in-aid were substantially reduced from what it was projected in the budget estimates. He also informed the house that the Tamil Nadu government is anticipating the release of entire funds due to the state under the Samagra Shiksha in the upcoming year. “The grants-in-aid receivable from the Union government are estimated at Rs 23,834 crore in budget estimates 2025-26,” he added.
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The Minister said that the revenue deficit in the revised estimates for 2024-25 is projected to decrease to Rs 46,467 crore, compared to Rs 49,279 crore in the budget estimates "on account of prudent fiscal management." He added that this is possible despite a substantial reduction in grants-in-aid from the Union government this year. Revenue deficit refers to when a government's expenses are more than its income from taxes and other sources, leading to a shortfall.
While the budget estimate is the government’s planned income and expenses for the upcoming year, presented at the start of the budget cycle, the revised estimate refers to an updated financial estimate based on actual spending and income trends during the year, compared to the original budget.
For 2025-26, he said, the revenue deficit is estimated to decline further to Rs 41,635 crore. The state’s finances have been deteriorating since 2015-16, when the revenue deficit first exceeded 1% of Gross State Domestic Product (GSDP), 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. GSDP is the total value of goods and services produced within a state in a year.