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POVERTY REDUCTION STRATEGY TN

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a. Evolution of Fiscal Imbalance<br />

Focusing first on fiscal imbalance, we observe that revenue deficit relative to GSDP had<br />

deteriorated from a low of 0.4 percent in 1995-96 to a peak of 3.3 percent in 1999-00.<br />

Thereafter there has been an improvement. Since 2005-06, the revenue account in Tamil<br />

Nadu has been in surplus. In 2008-09 RE, the revenue surplus is zero, meeting the Fiscal<br />

Responsibility and Budget Management Act (FRBMA) targets (Chart 3.2) but thereafter<br />

turned deficit. In the nineties, fiscal deficit had peaked in 1999-00 at 4.0 percent of<br />

GSDP. After that it improved in the next two years. It rose to 4.3 percent of GSDP in<br />

2002-03. But this rise reflects a one-time adjustment on account of State Electricity<br />

Board. Fiscal deficit in Tamil Nadu in 2009-10 BE is less than 3 percent, signaling<br />

achievement of the FRBMA target.<br />

Chart 3.2: Revenue and Fiscal Deficit as Percent of GSDP: Tamil Nadu<br />

5.00<br />

4.00<br />

3.00<br />

2.00<br />

1.00<br />

0.00<br />

-1.00<br />

-2.00<br />

19<br />

93-<br />

94<br />

3.80 4.01 4.26<br />

3.28 3.46 3.18 3.06 3.18<br />

2.58 2.74<br />

2.77 2.65 2.99<br />

2.22 2.34<br />

2.05 1.93<br />

1.84<br />

1.51<br />

1.51<br />

1.13 1.16 1.24<br />

1.01 1.22<br />

0.89<br />

0.57 0.37 0.35<br />

0.00 0.26<br />

19<br />

94-<br />

95<br />

19<br />

95-<br />

96<br />

19<br />

96-<br />

97<br />

19<br />

97-<br />

98<br />

19<br />

98-<br />

99<br />

19<br />

99-<br />

00<br />

20<br />

00-<br />

01<br />

20<br />

01-<br />

02<br />

20<br />

02-<br />

03<br />

20<br />

03-<br />

04<br />

20<br />

04-<br />

05<br />

20<br />

05-<br />

06<br />

20<br />

20<br />

20<br />

-0.87 06- -1.01 07- 08-<br />

07 08 -1.50<br />

09<br />

RE<br />

20<br />

09-<br />

10<br />

BE<br />

Fiscal Deficit<br />

Revenue Deficit<br />

Historically, Tamil Nadu has been one of the better performers in maintaining<br />

fiscal discipline. Table 3.2 places Tamil Nadu relative to other general category<br />

(southern) states in terms of four important indicators of fiscal performance.<br />

54

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