State Finances: A Study of Budgets

RBI has recently released its annual publication on State Finances: A Study of Budgets of 2025-26 analysing the latest fiscal position of State Governments across India. The report has a separate chapter on India’s demographic transition and its implication for State finances.

Key Takeaways for Tamil Nadu

Tamil Nadu has been identified as an ageing state – where the demographic share of working age population (15-59 years) begins to decline. This leads to shrinking tax bases and rising committed expenditure in pensions and healthcare.  Compared to peer states, Tamil Nadu operates with the highest committed expenditure burden at 36% of revenue expenditure and high revenue deficit of 1.2%, highlighting structural imbalance between revenue spends and earnings.