Public Debt and the Burden of interest Payments

1. TRENDS IN PUBLIC DEBT
AND THE BURDEN OF
INTEREST PAYMENTS IN
TAMIL NADU SINCE 1990-91

2. 2
This paper discusses the growth
pattern of public debt and interest
obligation of the government of Tamil
Nadu from 1990-91 to 2015-16.

3. 3
Findings
1. The public debt of Tamil Nadu is continuously
increasing during the study period.
The total debt has increased from Rs. 7,044 crore in
1990-91 to Rs. 2,16,770 crore in 2015-16 at current prices.
Public debt of the state has registered a growth of
2,977.37% from 1990-91 to 2015-16.
It has increased by more than 30 times during the
study period.

4. Table-1
Public debt in Tamil Nadu
Year
Outstanding
Liabilities
(Rs. Crore)
Liabilities as % of SDP
All States average
liabilities as % of GDP
1990-91 7044 20.3 22.5
1991-92 8341 20.4 22.5
1992-93 10206 21.4 22.4
1993-94 11616 20.2 21.7
1994-95 13541 19.7 21.3
1995-96 15134 19.4 20.9
1996-97 17257 19.3 20.7
1997-98 19512 18.8 21.7
1998-99 23189 19.6 22.8
1999-00 29568 22.0 26.1
2000-01 34541 23.5 27.3
2001-02 39069 26.2 29.3
2002-03 44471 28.1 31.0
2003-04 51759 29.4 31.8
2004-05 55968 27.9 31.3
2005-06 63848 28.6 31.1
2006-07 68561 26.3 28.9
2007-08 73887 21.1 26.6
2008-09 86154 21.5 26.1
2009-10 101710 21.2 25.5
2010-11 114470 19.6 23.5
2011-12 130630 17.4 22.8
2012-13 152810 17.9 22.2
2013-14 179570 18.5 22.0
2014-15 185610 17.3 21.7
2015-16 216770 19.7 23.4

5. 5

6. 6
2. The ratio of public debt to state income
has been fluctuating around 20% to 33% in
Tamil Nadu from 1990-91 to 2015-16.

7. 7
Table-2
Public debt and State Domestic Product in Tamil Nadu
Year
Public Debt
(Rs. Crore)
Growth Rate of
Public Debt (%)
SDP
(Rs. Crore)
Growth Rate of
SDP (%)
% of Public debt
to SDP
1990-91 7044 25.18 27674 15.62 25.45
1991-92 8341 18.41 32584 17.74 25.60
1992-93 10206 22.36 37922 16.38 26.91
1993-94 11616 13.82 51643 36.18 22.49
1994-95 13541 16.57 61276 18.65 22.10
1995-96 15134 11.76 69720 13.78 21.71
1996-97 17257 14.03 79118 13.48 21.81
1997-98 19512 13.07 92689 17.15 21.05
1998-99 23189 18.84 105728 14.07 21.93
1999-00 29568 27.51 112554 6.46 26.27
2000-01 34541 16.82 130413 15.87 26.49
2001-02 39069 13.11 131392 0.75 29.73
2002-03 44471 13.83 138253 5.22 32.17
2003-04 51759 16.39 153874 11.30 33.64
2004-05 55968 8.13 177222 15.17 31.58
2005-06 63848 14.08 228846 29.13 27.90
2006-07 68561 7.38 276711 20.92 24.78
2007-08 73887 7.77 313812 13.41 23.54
2008-09 86154 16.60 359391 14.52 23.97
2009-10 101710 18.06 430013 19.65 23.65
2010-11 114470 12.55 527912 22.77 21.68
2011-12 130630 14.12 602851 14.20 21.67
2012-13 152810 16.98 671728 11.43 22.75
2013-14 179570 17.51 771762 14.89 23.27
2014-15 185610 3.36 884195 14.57 20.99
2015-16 216770 16.79 1037488 17.34 20.89
% increase by 2015-16
over 1990-91
2977.37 - 3649 - -

8. 8
3. There has been an increase in interest payments of
Tamil Nadu government from Rs. 460 crore in 1990-91 to
Rs. 17,619 crore, an increase by more than 38 times.
4. The share of interest payment in total revenue
increased from 13.14% to 18.45% during the study period.
5. The share of interest payment in total revenue
expenditure has increased from 8.15% in 1990-91 to 11.62% in
2015-16 with some ups and downs.

9. 9
Table-4
Share of Interest Payments in Total Revenue and total Expenditure of Tamil Nadu
Year
Interest
Payments
(Rs. Crore)
Total
Revenue (Rs.
Crore)
Share of interest
payment in total
revenue (in %)
Total Revenue
Expenditure (Rs.
Crore)
Share of interest
payment in total
expenditure (in %)
1990-91 460 3500 13.14 5641 8.15
1991-92 560 4850 11.55 8680 6.45
1992-93 690 4770 14.47 8543 8.08
1993-94 960 5500 17.45 8758 10.96
1994-95 1,090 6600 16.52 9635 11.31
1995-96 1,290 8010 16.10 10911 11.82
1996-97 1,480 8870 16.69 13065 11.33
1997-98 1,760 9810 17.94 14950 11.77
1998-99 2,120 10790 19.65 17697 11.98
1999-00 2,710 12280 22.07 20728 13.07
2000-01 3,120 13990 22.30 21752 14.34
2001-02 3,510 14570 24.09 21557 16.28
2002-03 4,130 16200 25.49 25688 16.08
2003-04 4,700 18030 26.07 26550 17.70
2004-05 4,760 21570 22.07 29155 16.33
2005-06 4,560 25930 17.59 32009 14.25
2006-07 5,510 31190 17.67 44025 12.52
2007-08 6,090 32920 18.50 48869 12.46
2008-09 5,960 39390 15.13 61545 9.68
2009-10 6,670 41580 16.04 66240 10.07
2010-11 7,940 52430 15.14 81750 9.71
2011-12 8,870 65200 13.60 98160 9.04
2012-13 10,210 77800 13.12 107240 9.52
2013-14 12,400 83061 14.93 120060 10.33
2014-15 14,550 87007 16.72 140970 10.32
2015-16 17,619 95469 18.45 151590 11.62

10. 10
The annual growth rate of interest
payments in Tamil Nadu is higher than the all
States average growth rate in most of the years.

11. 11
Table-3
Interest Payments in Tamil Nadu
Year
Tamil Nadu All States
Interest Payments (Rs.
Crore)
Annual average growth
rate (%)
Interest Payments (Rs.
Crore)
Annual average
growth rate (%)
1990-91 460 25.51 8,655 20.44
1991-92 560 21.74 10,944 26.45
1992-93 690 23.21 13,210 20.71
1993-94 960 39.13 15,801 19.61
1994-95 1,090 13.54 19,413 22.86
1995-96 1,290 18.35 21,839 12.50
1996-97 1,480 14.73 25,387 16.25
1997-98 1,760 18.92 29,799 17.38
1998-99 2,120 20.45 35,441 18.93
1999-00 2,710 27.83 44,641 25.96
2000-01 3,120 15.13 50,985 14.21
2001-02 3,510 12.50 61,596 20.81
2002-03 4,130 17.66 69,027 12.06
2003-04 4,700 13.80 80,396 16.47
2004-05 4,760 1.28 86,421 7.49
2005-06 4,560 -4.20 84,024 -2.77
2006-07 5,510 20.83 93,180 10.90
2007-08 6,090 10.53 99,831 7.14
2008-09 5,960 -2.13 1,06,220 6.40
2009-10 6,670 11.91 1,16,427 9.61
2010-11 7,940 19.04 1,24,820 7.21
2011-12 8,870 11.71 1,36,820 9.61
2012-13 10,210 15.11 1,50,470 9.98
2013-14 12,400 21.45 1,68,900 12.25
2014-15 14,550 17.34 1,92,860 14.19
2015-16 17,619 21.09 2,14,250 11.09

12. 12

13. 13
All these reflect that the volume of interest payment
has become more and more burdensome and it is
eroding the financial base of Government of Tamil
Nadu.

14. 14
But, the welcoming trend to be noticed is
that the share of public debt of Tamil Nadu
as percentage of SDP is less than the all States
average liabilities as % of GDP throughout
the study period. (Table-1 , Slide 4)

15. 15

16. 16
Further the overall growth of the state income
was higher than that of public debt and so the ratio
of the public debt to state income has declined
from 25.45% in 1990-91 to 20.89% in 2015-16 in
Tamil Nadu. (Table-2, Slide 7)

17. 17
Also, the overall debt-SDP ratio for Tamil Nadu
remained lower than the 25% target of the 13th
Finance Commission during the period 2011-12 to
2013-14.
The decline in the debt-SDP ratio in recent years
too is a good sign for the economy of the State.

18. 18
It is also obvious that higher rate of growth of the
state income has made the burden of debt servicing less
onerous in Tamil Nadu.
P.E. Taylor has rightly said that, “A high national
income by sheer weight of proportion reduces the burden
of debt”.

19. 19
O Panneerselvam, the Deputy Chief Minister, who also
holds the finance portfolio, while presenting the current year
budget told that the pace of economic growth has picked up in
2017-2018 and will continue to improve in 2018-2019, and with the
favourable economic outlook of the State, economic growth will
surpass 9% in 2018-2019. And if his prediction comes true, there
will be definitely a huge reduction in the burden of public debt of
Tamil Nadu in the forthcoming years.

20. 20
Thank You
Dr. A. Jeyanthi
Associate professor of Economics
Govindammal Aditanar College for Women, Tiruchendur