Tamil Nadu’s former Chief Secretary K. Shanmugam has called for a balanced approach between development and welfare in governance of the State.
Addressing students at a panel discussion on the maiden budget presented by the Tamilaga Vettri Kazhagam for 2026-27 at the Madras Institute of Development Studies on Friday, Mr. Shanmugam, who was the State government’s Finance Secretary from 2010 to 2019, said that even as Tamil Nadu had been “a model for welfare state,” it did not neglect the importance of development.
The previous governments, regardless of the party, had done a wonderful job in the areas of health, education, infrastructure development, and the provision of basic amenities in villages, he said.
“But, then somewhere around the same period, we had started shrinking our thoughts, and we had started looking at the political dividends, more than welfare. Till a particular point of time, prior to the launch of any scheme, a thorough discussion was held between politicians and officials, and the end objective used to be defined. The end objective was not political at that time. It has changed over a period of time,” Mr. Shanmugam said.
Emphasising that “borrowing per se is good but it has to be within limits,” the former Chief Secretary said that when the borrowed money was deployed for capital expenditure, “this creates a good base for the economy to move forward; generate employment and future income also.” The debt to GSDP beyond a point would be “regressive on economic growth, especially when such borrowed funds are largely used on revenue expenditure,” which he suggested, be kept under control.
Former Director of Madras School of Economics, K.R. Shanmugam, also the economic consultant to the State government, said the budget struck a “balance between welfare and fiscal prudence.” It had given priorities to skill development and rural and urban development, while continuing most of ongoing welfare schemes.
Some of the existing schemes had rebranded with higher fund allotment. Also, the statutory requirement of keeping fiscal deficit at 3 per cent of the Gross State Domestic Product had also been maintained.
On the macro fiscal indicators, Dr. Shamugam said that though fiscal deficit was being managed at about 3%, revenue deficit had been on the rise and the fact that it was about 1.4% of GSDP meant that 50% of the borrowed money was spent on consumption and not on investment.
Describing the present level of proportion of outstanding liabilities to the GSDP which stood at about 27% during 2025-26 as “unsustainable,” the veteran academician said the permissible level for the State would be 23% even though the N.K. Singh panel on Fiscal Responsibility and Budget Management Act had recommended it to be 20%.
If the State ensured higher economic growth (nominal) at 15% and reduced fiscal deficit by 1%, this would bring debt to a sustainable level in the short run. The State, which had suffered a higher level of debt that had been caused by the COVID-19 pandemic, could approach the Centre to provide a debt relief scheme, Dr. Shanmugam said.
The Hindu’s senior associate editor T. Ramakrishnan spoke on the free power supply scheme for farmers, huts and the domestic category.
Published – August 16, 2026 12:43 am IST
