Two South Indian states have released comprehensive white papers outlining their fiscal conditions under new governments. Tamil Nadu's outstanding debt stands at ₹13.18 trillion, while Kerala's debt is ₹5.07 trillion. According to reports from Business Standard, these documents were among the first promises made by Chief Ministers C Joseph Vijay and V D Satheesan respectively, following their election victories. The white papers represent a trend in India where new governments seek transparency with voters before implementing reforms.
Tamil Nadu's debt stands at 28.3% of Gross State Domestic Product (GSDP), exceeding the 25% threshold under fiscal responsibility law. As reported by Business Standard, the state's direct debt has nearly doubled from ₹5.13 trillion to around ₹10 trillion over the last five years. Committed expenditure rose from ₹1.25 trillion to ₹1.89 trillion, increasing its share of revenue receipts from 60% to 64%. Finance Minister N Marie Wilson noted that every child in Tamil Nadu is born with a debt of ₹1.29 lakh, significantly higher than peer states. The state's capital expenditure remains limited to 1.44% of GSDP, constituting the base for long-term economic growth.
According to Business Standard reports, experts highlight structural differences between states that affect fiscal comparisons. Tamil Nadu has around 1.7 million salaried government employees and pensioners versus 900,000 in Gujarat, 1.4 million in Maharashtra, and 1.2 million in Karnataka. Lekha Chakraborty from the National Institute of Public Finance and Policy emphasized that southern states have higher social sector spending, larger government workforce, and extensive public infrastructure. The DMK leadership predicts Tamil Nadu's debt could reach ₹20 trillion if the current government completes its term.
Kerala faces a structural fiscal problem with debt at 35.5% of GSDP. As reported by Business Standard, the state's salaries, pensions, and interest payments consume approximately 80% of revenue receipts, leaving minimal room for other sectors. The state's capital expenditure remains at only 1.3% of GSDP. The Kerala white paper reflects on the decline in own tax revenues, with the ratio of own tax revenues to GSDP falling from 6.94% in 2015-16 to 6.41% in recent years, largely attributed to SGST performance. Economist S Adikesavan argues that states deserve pragmatic flexibility in fiscal deficit norms, comparing Kerala's ₹5 trillion debt to the Centre's ₹214 trillion debt burden.
Despite concerns, industry experts believe Tamil Nadu has advantages including a broader industrial base and stronger investment pipeline. According to Business Standard reports, some economists argue for more flexibility in fiscal deficit norms, citing the Centre's infrastructure spending approach that exceeds 3% of GDP. The white papers suggest phasing out revenue deficits in line with Finance Commission recommendations, while experts emphasize the need for fairer federal sharing and performance-based transfers to address revenue gaps. Additionally, a key parliamentary committee will scrutinise India's evolving economic landscape in 2025-26, examining growth, inflation, employment, and investment amid global conflicts and trade uncertainties. However, experts note that macroeconomic conditions are raising concerns about generating adequate productive jobs, with technological change potentially exacerbating employment challenges.
