A state’s fiscal situation can shift materially within a single budget cycle, as Tamil Nadu’s own numbers demonstrate. The revenue deficit in FY26, at `78,324 crore, is the highest the state has ever recorded—even higher than during the COVID year of FY21. This did not happen overnight. Warning signs were visible in FY23 and FY24, but there was no institutional mechanism to force a course correction. In an interview, Nithin Chandra, Chennai-based senior partner at Kearney, a global management consulting firm drew on the data presented in the White Paper, his analysis of peer-state trajectories, and the reforms needed to restore TN’s fiscal health. Edited excerpts:How much of the problem is due to weaknesses in TN’s tax administration?Administrative deterioration is perhaps the single biggest factor within the state’s control. The White Paper explicitly attributed the GST shortfall to systemic corruption in the Commercial Taxes Department. Stamp duty collections have stagnated despite TN having one of India’s most valuable property markets. It identifies outdated guideline values, delays in registrations, and significant leakages as the main reasons. Excise revenue has grown much more slowly than in peer states. Between 2021-22 and 2025-26, TN’s excise collections grew at a CAGR of 9.49%, compared with 11.66% in Karnataka and 18.69% in Maharashtra. Mining revenue, at `4,433 crore, also remains below what the state’s mineral resources should potentially generate. These are largely administrative issues rather than structural constraints.Some argue TN’s export-oriented economy results in lower GST collections. Is that a valid explanation?It is technically correct, but only partially. TN is among India’s most export-oriented states, with merchandise exports of around $52bn. Since GST is a destination-based tax, exports are zero-rated, meaning the producing state does not collect GST on exported goods. This does have a dampening effect on TN’s GST-to-GSDP ratio. However, exports also generate employment, incomes and domestic consumption, all of which should expand the tax base. If revenue administration is functioning efficiently, these second-order effects should offset much of the initial impact. The fact that this has not happened suggests that the export structure is only a partial explanation. Administrative inefficiencies remain the more significant issue.Can plugging leakages and improving tax compliance strengthen finances?Yes, substantially. The White Paper estimates that if TN had maintained its 2006-07 own-tax-to-GSDP ratio of 8.94%, the state would today be collecting around `1.23 lakh crore more in annual own-tax revenue.That is nearly 90% of the fiscal deficit projected for FY26. Even recovering half of this gap through sustained administrative reforms over the next five years would improve the state’s fiscal position. Revenue reform does not require new taxes or higher tax rates. It requires collecting, with reasonable efficiency, the revenue that is legally dueWhat reforms are needed in stamp duty administration?TN has one of India’s most valuable property markets, particularly in Chennai, Coimbatore and the KTCC corridor. Yet stamp duty collections as a share of GSDP have increased by just 0.03 percentage points since 2021-22, compared with 0.20 percentage points in Maharashtra and 0.12 percentage points in Gujarat. Updating guideline values, streamlining registration processes and reducing leakages should significantly improve revenue performance.How can the state improve excise revenue?Excise is another area with untapped potential. TN’s excise collections stand at around `11,836 crore—less than one-third of Karnataka’s `41,000 crore, despite comparable population levels and a larger economy. While differences in consumption patterns and policy partly explain the gap, they do not fully account for it. A comprehensive review of TASMAC’s pricing, margins and distribution model, along with stronger enforcement against the parallel liquor market, could help unlock substantial additional revenue.
