Tamil Nadu Finance Minister Thangam Thennarasu on Friday presented the 2025-26 Budget, the final full-fledged one before the Assembly elections in 2026.
Blending welfare schemes with ambitious infrastructure development plans, the budget increased allocations for ongoing schemes benefiting women and higher education and continued the social justice push of the current DMK government. In a major step, over 10 lakh government employees of the state are set to get a boost with the restoration of earned leave encashment, which was stopped since Covid-19.
The Budget pegged the State’s real GSDP growth for FY25 at 9 per cent and nominal GSDP growth at 14.5 per cent for FY25. The fiscal deficit for FY26 is estimated at ₹1,06,963 crore (3 per cent of GSDP), an increase from the revised estimate of ₹1,01,698 crore (3.26 per cent of GSDP) for FY25. However, it is projected at 3 per cent of GSDP for FY26.
- Also read: Tamil Nadu Budget 2025: Infra gets big boost with a 22% increase in capex for FY26
The revenue deficit is projected at ₹41,634.93 crore for FY26, a reduction from ₹46,467.5 crore in 2024-25. Following a steady decline since 2020-21, the revenue deficit is now at 1.17 per cent of GSDP for FY26, nearing 2015-16 levels.
Total revenue receipts for 2025-26 are estimated at ₹3,31,569 crore, a 12.81 per cent increase from ₹2,93,906 crore in 2024-25. Of this, 75.3 per cent comes from the State’s tax revenues, and the state anticipates a 14.6 per cent growth in this revenue in 2025-26. “We have been seeing brisk growth in stamp duty, GST, and motor vehicle taxes, but the growth in VAT/Excise (fuel and liquor) has been going slow,” T Udhayachandran, Principal Secretary-Finance, Government of Tamil Nadu, said on Friday.
With regard to debt, which has been consistently high for the state, the finance secretary reiterated that it has to be seen from the lens of the debt-to-GDP ratio. The outstanding debt-to-GSDP for 2024-25 is revised to 26.43 per cent, slightly above the 26.41 per cent projected earlier due to updated GSDP estimates. However, for 2025-26, the ratio is expected to decline to 26.07 per cent, staying well within the 15th Finance Commission’s limit of 28.70 per cent.
- Also read: TN Budget 2025: Govt announces 2,000-acre modern city, Semiconductor Mission 2030 & more
The Budget underscored its commitment to capital expenditure, with ₹57,231 crore earmarked for 2025-26, an increase of 22.38 per cent over the ₹46,766 crore Revised Estimate for FY25. It stressed on a need to focus on sunrise sectors particularly semiconductors, technical textiles, biosciences, space technology, and animation & visual effects to drive future economic momentum amidst global trade wars.
In his budget speech, the finance minister said that due to the DMK government’s firm stand on the three-language policy, the union government has withheld ₹2,152 crore in education funds, and as a result, the state has chosen to fund school education independently.
“Fortunately, our growth rate surpasses the national average, which is a positive sign. However, to remain competitive amid global shifts, we must prioritise emerging sectors and high-value industries,” Udhayachandran said .
