A recent report by the Comptroller and Auditor General of India (CAG) has brought to light a concerning fiscal trend in Tamil Nadu: the state’s interest payments on public debt have exceeded its pension expenditure for government employees. This revelation, part of the CAG’s State Finances 2022–23 report, underscores the mounting pressure of debt servicing on Tamil Nadu’s budget and raises questions about long-term fiscal sustainability.
According to the report, Tamil Nadu is among nine states—including Andhra Pradesh, Gujarat, Haryana, Karnataka, Punjab, Rajasthan, Telangana, and West Bengal—where interest payments outpaced pensionary obligations in the fiscal year 2022–23. This marks a shift from previous years, where pensions typically ranked second after salaries in the state’s committed expenditure. The trend reflects the growing burden of public debt and highlights the need for prudent financial management.
The report also notes that committed expenditure, which includes salaries, pensions, and interest payments, has surged 2.49 times over the past decade, reaching ₹15.63 lakh crore across all states. In Tamil Nadu, this category consumes a significant portion of the state’s revenue, leaving limited room for discretionary spending or developmental initiatives. The state was also among those that received Finance Commission revenue deficit grants, indicating challenges in meeting fiscal targets.
Experts warn that rising interest payments could crowd out essential welfare and infrastructure spending if not addressed through strategic debt restructuring and revenue enhancement. As Tamil Nadu continues to invest in social schemes and public services, balancing debt obligations with long-term growth priorities will be critical to maintaining fiscal health.