Kearney study recommends measures to improve Tamil Nadu’s fiscal capacity
A report by Kearney suggests that Tamil Nadu can significantly improve its fiscal capacity without raising taxes by enhancing revenue collection efficiency and project management. The study highlights that the state's GST-to-GSDP ratio lags behind other major Indian states, indicating a need for better compliance and enforcement.
Why it matters
Improving fiscal health in India's major industrial states is critical for national economic growth and infrastructure development.
With a revenue deficit of ₹78,324 crore, an outstanding debt exceeding ₹10 lakh crore, and the own-tax-to-GSDP ratio at 5.45% , Tamil Nadu’s core challenge is not that it borrows too much; it is that it collects and spends less efficiently than comparable large States, says a recently released Kearney report on ‘Tamil Nadu’s Fiscal Crossroads’.
“Cautiously estimated, narrowing this gap can add more than ₹1.2 lakh crore of annual fiscal capacity without new taxes or additional borrowing, through better compliance, valuation, monitoring, and project discipline,” the report says.
“The opportunity is not merely to narrow a deficit; it is to restore the State’s capacity to invest confidently in infrastructure, human development, and competitiveness that its next phase of growth demands,” the study added. Better collection of revenue, sharper prioritisation, and more disciplined execution can create a conducive environment to fund growth, welfare, and fiscal prudence.
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