For every Rs 100 spent on projects, Tamil Nadu pays Rs 138 in interest

The new budget reports a Rs 690 crore cut in the state's debt. Here is what that number does, and does not, tell you.Tamil Nadu will spend Rs 78,683 crore this year paying interest on money it has already borrowed. It will spend Rs 56,985 crore building anything new. That works out to Rs 138 handed to lenders for every Rs 100 that goes into roads, hospitals, schools and power lines.The interest is contracted. It gets paid first, before a single new scheme is decided.Both figures are in the budget speech Finance Minister N Marie Wilson read to the Assembly on Wednesday, the first from the Tamilaga Vettri Kazhagam-led coalition government.Wilson said outstanding liabilities would be Rs 10,98,768 crore in 2026–27, some Rs 690 crore below the interim budget figure he stated in February. That is a cut of 0.06 per cent. On a chart, it is thinner than the line drawn around the bar.The same budget adds Rs 98,936 crore to debt against last year. That is 143 times larger than the reported reduction. IF DEBT DOUBLED, WHY IS THERE NO CRISIS?Because the economy doubled too.Between 2020–21 and 2025–26, the state's debt rose 95 per cent, from Rs 5.13 lakh crore to Rs 10 lakh crore, according to the government's own white paper. Over the same period, Tamil Nadu's output rose 97 per cent, according to the Ministry of Statistics and Programme Implementation.Debt matters in relation to the economy it is drawn from, the way a home loan matters in relation to what the borrower earns. Measured that way, Tamil Nadu's debt went from 28.7 per cent of the economy to 28.3 per cent. It moved less than half a percentage point in five years.THEN WHAT IS THE REAL PROBLEM?Interest does not shrink when the economy grows. It compounds. The bill has gone from Rs 41,564 crore in 2021–22 to Rs 78,683 crore this year. The government's own medium-term plan, published with this budget, projects Rs 89,698 crore in 2027–28 and Rs 1,02,256 crore in 2028–29. Within three years, more than Rs 1 lakh crore a year will leave the treasury before anything is built or run.HOW MUCH OF THE BORROWING BUILDS ANYTHING?Less than half.Tamil Nadu will borrow Rs 1,21,819 crore more than it repays in 2026–27. Of that, Rs 55,775 crore covers day-to-day running costs, salaries, pensions, subsidies, the ordinary business of government. Borrowing to build leaves an asset behind. Borrowing to pay bills leaves only the repayment.WHAT HAS TO GO RIGHT?The budget expects the debt ratio to ease to 26.1 per cent by 2028–29, even as interest costs cross Rs 1 lakh crore. That works only if the economy keeps growing at close to the pace of the last five years.Wilson has levied a privilege fee on liquor manufacturers that he expects will raise Rs 1,000 crore a year. He says faceless GST assessment, faceless registration, and computerised mining checks will bring in about Rs 15,000 crore more. A Revenue Augmentation Committee headed by the economist Montek Singh Ahluwalia has been set up to find further sources.AIADMK leader Edappadi K Palaniswami called the revenue methods vague and asked whether constituting a committee would generate money, according to The Federal.For five years, Tamil Nadu's debt and its economy have climbed at the same speed. The budget assumes this pattern will hold. That assumption carries more weight than any number in it.- EndsPublished By: Pathikrit SanyalPublished On: Aug 5, 2026 18:46 IST