Tamil Nadu politicians debate government's rising debt levels

Debt is an important issue in Tamil Nadu politics. Last week, opposition leader Edappadi K Palaniswami raised concerns about the state's growing debt. BJP leader K Annamalai claimed the government is borrowing too much and linked this debt to corruption. However, Finance Minister Thangam Thennarasu pushed back on this claim, asking why the same standards aren't applied to the central government, which is more in debt than Tamil Nadu. Finance Minister Thennarasu pointed out that borrowing can be a useful tool when kept within limits. It can help fund infrastructure and welfare projects. Unless there is direct proof of mismanagement, connecting debt with corruption is seen as an unfair political attack. Annamalai argued that states should only be compared to each other, not with the central government. But he ignored important facts about fiscal rules established by the Fiscal Responsibility and Budget Management Act. This Act applies to both state and central governments, setting limits on fiscal deficits and debt levels. It ensures that both levels of governance maintain fiscal discipline. By these standards, it is reasonable to compare Tamil Nadu's fiscal management with the centre's performance. The report highlights how politicians may increase spending through borrowing instead of raising taxes, putting future generations at risk. Recent central government policies, like cutting corporate tax rates, haven’t brought the expected economic benefits. Instead, companies invested abroad rather than in India, worsening the financial situation. Currently, the central government has a debt level much higher than what the Fiscal Responsibility and Budget Management Act originally targeted, while Tamil Nadu is within its limits. Tamil Nadu's debt is approximately 26% of its total state economic output, significantly below a set target. Despite this, the state has been able to manage its finances better than the central government, which has higher fiscal deficits. With the introduction of the Goods and Services Tax, states have seen a decrease in their fiscal independence. Tamil Nadu heavily relies on its own revenue, while some northern states depend more on central transfers. If debt levels are to be debated, it is important to consider them against established targets. Discussions about fiscal policy should focus on facts, efficiency in spending, and overall financial management, rather than simplistic accusations. In a competitive federal system, it is crucial to compare fiscal performance responsibly for the benefit of the people in Tamil Nadu and the wider nation.