Ahead of its Shadow Budget presentation on Monday, the Pattali Makkal Katchi (PMK) on Sunday unveiled its ‘Shadow Economic Survey’ for the second consecutive year.

According to the report, against the projected State’s Own Tax Revenue (SOTR) of ₹2,20,895 crore, only ₹1,92,493.07 crore was mobilised, recording a shortfall of 13%. None of the major components of the SOTR, including the Goods and Services Tax (GST), stamp duty and registration charges, and motor vehicle tax, met their targets.

Although Tamil Nadu’s economy grew by 10.83% in 2024-25, the report said the higher growth did not translate into higher revenue for the exchequer. The State’s non-tax revenue for 2025-26 was 29.10%, lower than the previous year and 17.31% below the Budget estimate, the report said. The State also received a lower-than-expected share of Central taxes and grants-in-aid, it said.

Capital expenditure

Capital expenditure did not increase in 2025-26, resulting in limited creation of public infrastructure and productive assets.

At the same time, revenue expenditure rose sharply. The government’s failure to increase revenue and contain expenditure significantly widened the revenue deficit, the report said.

The ₹6,000-crore farm loan waiver, the enhancement of free electricity to 200 units, and the closure of 717 Tasmac outlets would further widen the revenue deficit in 2026-27, it said.

With the State’s total debt projected to reach ₹16.70 lakh crore by the end of the current year, the government would have to pay ₹80,000 crore as interest on its borrowings in 2026-27. Public Sector Undertakings (PSUs) would have to pay around ₹48,875 crore as interest on their borrowings, the report said.

To augment revenue, the report suggested measures to increase the SOTR to 7% over the next five years and raise the State’s economic growth to 12%-13% annually. It also said the Centre’s shareable tax pool allocated to the States should be increased to 50%, and that cesses and surcharges levied by the Union government should be merged with the divisible pool of taxes.

Published - July 26, 2026 11:21 pm IST