4 months ago
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A Congress enactment colleague’s caller station has stirred up rather a debate. The assertion is stark, the connection urgent, and the decision dramatic: Tamil Nadu’s indebtedness concern is “alarming.”
The examination is eye-catching too. In 2010, Uttar Pradesh had much than treble the indebtedness of Tamil Nadu. Today, Tamil Nadu’s outstanding indebtedness is higher than Uttar Pradesh’s. On the look of it, that sounds damning. A azygous indicator. A cleanable before-and-after. A tidy verdict.
But nationalist concern is seldom tidy and single-indicator stories, nevertheless viral, often fell much than they reveal. I americium not astir to disregard concerns connected debt. Debt shapes fiscal space, aboriginal budgets, and argumentation choices. However, debt, by itself, is not a motivation failing, nor is it a capable summary of a State’s economical health. To recognize what Tamil Nadu’s numbers really mean, we request to measurement back, widen the lens, and spot that 1 indicator wrong a larger economical story.
Let america statesman wherever the disapproval begins. As of 2025-26, Tamil Nadu’s outstanding indebtedness is estimated astatine 26.1% of gross authorities home merchandise (GSDP), down from 26.4% successful 2024-25 and 26.6% successful 2023-24. The State’s indebtedness ratio has been connected a gradual downward way since its COVID-19 peak, though it remains supra pre-Covid levels.
Uttar Pradesh, by contrast, is estimated to extremity 2025-26 with outstanding liabilities of 29.4% of GSDP, besides declining from 30.8% successful 2024-25. U.P. remains much indebted than Tamil Nadu comparative to the size of its economy, adjacent though Tamil Nadu’s implicit indebtedness banal is present higher. Tamil Nadu’s economy, astatine ₹35.7 lakh crore GSDP successful 2025-26, is importantly larger per capita than Uttar Pradesh’s ₹30.8 lakh crore economy, contempt U.P. having astir 3 times the population. Absolute comparisons without denominators marque for bully headlines, but anemic analysis.
What astir the involvement burden, different complaint raised successful the post? Tamil Nadu does walk a precocious stock of its gross receipts connected involvement payments, astir 21% successful 2025-26. That places it among the higher-interest-burden States. Yes, involvement costs constrain budgets. But no, the numbers bash not bespeak a indebtedness spiral. In fact, Tamil Nadu’s fiscal shortage is projected astatine 3% of GSDP successful 2025-26, little than the 3.3% revised estimation for 2024-25, and afloat wrong the Fiscal Responsibility and Budget Management (FRBM) framework. The absorption of question matters arsenic overmuch arsenic the level.
A much meaningful mode to measure indebtedness sustainability implicit the past decennary is to measurement distant from header banal numbers and look alternatively astatine the mechanics of indebtedness accumulation. Over the ten-year play from 2012-13 to 2021-22, Tamil Nadu’s mean existent GDP maturation has exceeded its mean existent effectual involvement complaint by astir 2.1 percent points, portion adjacent successful the much caller five-year window, which includes the pandemic shock, the growth-interest differential remains affirmative astatine 1.3 percent points. This matters due to the fact that erstwhile maturation persistently exceeds the effectual outgo of borrowing, indebtedness ratios stabilise oregon diminution unless superior deficits are precise large, which successful Tamil Nadu’s lawsuit person been beneath 2% of GSDP.
So, what distinguishes Tamil Nadu is not that its indebtedness rose, but what happened alongside that rise. Notably betwixt 2020-21 and 2023-24, Tamil Nadu maintained existent GSDP maturation averaging supra 7%, with services and manufacturing consistently expanding. The system did not stagnate nether debt. It expanded done it.
Tamil Nadu’s per capita GSDP successful 2023-24 stood astatine ₹3.53 lakh, much than 3 times Uttar Pradesh’s ₹1.07 lakh. This reflects decades of higher productivity, industrialisation, and quality superior formation. Tamil Nadu is acold much urbanised, which matters due to the fact that it correlates with higher taxation capacity, amended work delivery, and much diversified employment. Human improvement indicators reenforce this picture. Tamil Nadu consistently outperforms astir States connected literacy, wellness access, and demographic transition. These outcomes trim semipermanent fiscal pressures by lowering dependency ratios and improving labour productivity.
Where Tamil Nadu’s communicative becomes astir forward-looking is successful concern and economical composition. In 2025-26, Tamil Nadu planned a 22% summation successful superior outlays, with particularly crisp increases successful transport, municipality development, and energy. The State has besides committed resources to the Tamil Nadu Semiconductor Mission, fintech hubs, R&D ecosystems, and precocious manufacturing. Debt that finances aboriginal productivity is not the aforesaid arsenic indebtedness that simply fills gross gaps. The creation of expenditure matters, and Tamil Nadu’s capital-heavy fund tilt suggests an system inactive investing its mode forward.
There is simply a deeper governmental system question hiding down the indebtedness debate. Tamil Nadu raises 75% of its gross receipts from its ain resources. 25% comes from its stock successful cardinal taxes and via grants. Uttar Pradesh, by contrast, depends connected the Centre for implicit fractional of its gross receipts. This reflects stronger taxation bases, higher compliance, and denser economical enactment successful Tamil Nadu.
Yet, fiscal debates cannot disregard past performance, contiguous capacity, and fiscal transfers. States that industrialised early, invested successful quality development, and controlled colonisation growth, present look tighter borrowing constraints and little transfers, adjacent arsenic they proceed to lend disproportionately to nationalist maturation and taxation collections. If indebtedness unsocial becomes the yardstick, the inducement operation gets inverted. Good show gets punished, and catch-up States get imperishable enactment with small accountability. That is not cooperative federalism. It is simply a look for discord.
One indicator tin spark a debate. It cannot settee it. The existent communicative is not astir who overtook whom connected a indebtedness chart. It is astir what States did with their borrowing, what economies they built, and what futures they are financing. On that score, Tamil Nadu’s communicative remains acold much resilient, and acold much relevant, than a azygous enactment connected a graph would person america believe.
Salman Soz is simply a subordinate of the Indian National Congress and co-author of ‘Unshackling India: Hard Truths and Clear Choices for Economic Revival’. Views expressed are personal.
