CHENNAI – Tamil Nadu’s public debt is projected to surge to ₹10.71 lakh crore by 2026-27, Finance Minister Thangam Thennarasu revealed while presenting the interim budget in the state assembly on Tuesday.
According to the interim budget estimates for 2026-27, the debt will climb from ₹9.52 lakh crore in the 2025-26 revised estimates, up from the earlier budgeted ₹9.29 lakh crore. The minister highlighted a key factor inflating these figures: the ₹9,523 crore linked to the Chennai Metro Rail Phase-II project, approved as a central sector initiative.
Thennarasu pointed out that despite repeated requests, the central government has not recorded this amount in its accounts, artificially boosting the state’s debt. Excluding this, the outstanding debt stands at ₹9.42 lakh crore for 2025-26 revised estimates and ₹10.62 lakh crore for 2026-27 interim estimates.
For 2026-27, the state plans to borrow ₹1.79 lakh crore while repaying ₹60,413.42 crore, with the debt-to-GSDP ratio estimated at 26.12%. The interim budget also forecasts a revenue deficit of ₹48,696.32 crore, down from ₹69,219 crore in 2025-26 revised estimates and ₹41,635 crore in original estimates.
The minister attributed the 2025-26 revenue deficit spike to GST rate cuts, delays in centrally sponsored scheme funds, and higher spending on losses at Tamil Nadu Power Distribution Corporation Limited. Without these pressures, the deficit could have aligned with initial projections.
Fiscal deficit for 2026-27 is pegged at ₹1.21 lakh crore, slightly lower than ₹1.24 lakh crore in 2025-26 revised estimates, dropping from 3.48% to 3% of GSDP – a sign of fiscal consolidation. Thennarasu noted that greater central support this fiscal year could have strengthened the state’s finances further.
This budget presentation underscores Tamil Nadu’s ongoing fiscal challenges amid center-state tensions, as the state navigates borrowing needs for development while aiming for sustainable debt levels.