Definition of Total Liabilities
Tamil Nadu’s Rising Liabilities and Fiscal Responsibility: The Tamil Nadu Fiscal Responsibility and Budget Management Act (TNFR Act), 2003 defines total liabilities as the sum of all liabilities under the Consolidated Fund and Public Account of the State. These include borrowings, loans, and other financial obligations undertaken by the government.
Static GK fact: The Consolidated Fund of the State is the chief account into which all revenues and loans are credited, and from which all expenditures are made.
However, borrowings by State corporations and agencies for implementing planned programmes are not reflected in these accounts. This results in an underestimation of the State’s true financial liabilities.
Off-Budget Borrowings and Reforms
Certain State agencies borrow funds independently to finance public projects. Although these loans do not appear in the main budget, the principal and interest are repaid by the State government, creating off-budget liabilities.
To address this, from FY 2021–22, the Union government mandated that borrowings by State-owned entities—if serviced through the State Budget or revenue assignments—must be included in the State’s total borrowing limit.
This reform ensures fiscal transparency and discipline, as several States, including Tamil Nadu, were bypassing borrowing limits by using off-budget mechanisms.
Role of State Development Loans (SDLs)
To raise funds, Tamil Nadu issues State Development Loans (SDLs), which are bonds auctioned by the Reserve Bank of India (RBI). These loans are issued for various tenures, and repayment of both principal and interest occurs upon maturity.
Static GK Tip: State Development Loans are a key instrument through which Indian States borrow directly from the market, backed by the sovereign guarantee of the State government.
SDLs constitute a major portion of Tamil Nadu’s outstanding liabilities, forming the backbone of its public debt portfolio.
Borrowing Ceiling and Fiscal Targets
The Union government determines the annual borrowing ceiling for each State. For 2025–26, the ceiling has been set at 3% of the projected Gross State Domestic Product (GSDP).
An additional borrowing of 0.5% of GSDP is allowed for States implementing power distribution reforms and enhancing intra-state transmission capacity.
Tamil Nadu has planned a total borrowing of ₹1,62,096.76 crore during 2025–26, with repayments amounting to ₹55,844.53 crore. Consequently, the outstanding borrowing as on March 31, 2026, is projected at ₹9,29,959.3 crore, as per the State Budget 2025–26.
Long-Term Liabilities and Interest Burden
According to the Comptroller and Auditor General (CAG) Report 2025, Tamil Nadu’s liability on account of interest payments from 2024–25 onwards will be around ₹29,159.18 crore. The principal amount to be repaid over the next decade on market loans stands at ₹3,88,202.82 crore.
Static GK fact: The CAG of India is a constitutional authority established under Article 148, responsible for auditing government expenditure and ensuring financial accountability.
The rising debt servicing costs highlight the importance of sustainable borrowing practices and fiscal prudence in State finances.
Static Usthadian Current Affairs Table
Tamil Nadu’s Rising Liabilities and Fiscal Responsibility:
| Topic | Detail |
| Governing Act | Tamil Nadu Fiscal Responsibility and Budget Management Act, 2003 |
| Definition of Total Liabilities | Includes liabilities under Consolidated Fund and Public Account |
| Off-Budget Borrowings | Borrowings by State-owned agencies repaid by the State government |
| Fiscal Reform Year | FY 2021–22 |
| Major Borrowing Instrument | State Development Loans (SDLs) |
| SDL Auction Conducted By | Reserve Bank of India |
| Borrowing Ceiling for 2025–26 | 3% of GSDP (additional 0.5% for power reforms) |
| Planned Borrowing (2025–26) | ₹1,62,096.76 crore |
| Outstanding Debt (March 31, 2026) | ₹9,29,959.3 crore |
| CAG Reported Interest Liability | ₹29,159.18 crore |
