Tamil Nadu Finance Minister N Marie Wilson (bottom left) presents the first budget of the TVK-led government in the Assembly. ANITamil Nadu Finance Minister N Marie Wilson on Wednesday presented the first budget under the new government led by Chief Minister C Joseph Vijay. The minister committed to push the size of Tamil Nadu’s economy to the $1.5-trillion mark by 2036. As of now, the gross state domestic product (GSDP) of the state ranges between $350 billion to $400 billion depending on the exchange rate. In other words, the government aims to more than treble the size of the economy over the next 10 years.Tamil Nadu, along with states such as Maharashtra, Gujarat and Karnataka, has long been among India’s fastest growing states. It is second in terms of overall economic output among all Indian states, with only Maharashtra ahead of it. But while Tamil Nadu’s headline economic growth has been fairly robust over the past few years, its financial health has worsened. The main challengeIn his budget speech, Wilson made it clear that past Tamil Nadu governments have been spending far in excess of what they earned and, as a result, borrowed far more than what they were capable of repaying in a sustainable manner.“The fiscal position of the state is in the red, and we have been handed a treasury box that is overburdened with debt and sub-optimal income with leaking holes. The repair has been started, but would need at least two years to bring the financial administration back to the track of fiscal prudence,” he said.Also Read | Tamil Nadu is growing rapidly. Why are its revenues not keeping pace?The two charts below provide a glimpse of the fiscal challenge facing Tamil Nadu.Chart 1 maps the total debt as a percentage of the GSDP (or the state’s annual economic output) for Tamil Nadu and some of the comparable states. While this figure has not really shot up, what is noteworthy is that it is much higher than states with comparably sized economies. Story continues below this ad Tamil Nadu’s debt-to-GSDP ratio.The reason is that Tamil Nadu has borrowed more and more each year just to plug the gap between its expenditure and revenues. The consequence of having high levels of debt is that, over time, the interest burden itself keeps going up, especially if the state doesn’t enhance its ability to raise more revenues.This is what chart 2 captures. The percentage of money that goes towards just paying the interest on past debt has been rising steadily for Tamil Nadu. More and more of TN’s revenue is going towards paying interest on its debt. The immediate consequence of more money going towards repaying interest is that the government has less left for either welfare (such as providing relief to the poor) or capital expenditure (such as money spent towards making roads and ports, the kind of assets that increase the productive capacity of the state’s economy). Also Read | For four new state governments, same old problem: A mounting debt burdenThe White Paper brought out by the state last month explained how rising interest payments have brought TN’s finances to the brink.Story continues below this ad“The rising interest bill becomes itself a reason to borrow further because the State must finance the interest payment from somewhere, and if revenue receipts are insufficient, additional borrowing fills the gap. This is the debt-interest spiral, and Tamil Nadu is now entering its early stages,” it stated.What the budget saysGiven the stark challenge facing its finances, the Tamil Nadu government would have to, at the same time, reduce its borrowings by cutting expenditure as well as find ways to increase its revenues. “…this government has already taken action towards mobilization of nearly Rs 15,000 crore… and has constituted a high level Revenue Augmentation Committee under the chairmanship of the renowned economist… Montek Singh Ahluwalia,” stated the Finance Minister in his speech. Wilson also promised that the debt-to-GSDP ratio — which was at 28% as of 2025-26 — will be brought down to 26.57% in 2027-28 and 26.10% in 2028-29.Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster. Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad. Professional Focus He writes three regular columns for the publication. ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments. GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week. Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old. Recent Notable Articles (Late 2025) His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections: Currency and Macroeconomics: "GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy. "GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025). "Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025). Global Geopolitics and Trade: "Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025). "The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book. "ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025). Domestic Policy and Data: "GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025). "ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets. "GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025). International Economic Comparisons: "GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025). "On the loss of Europe's competitive edge" (Oct 17, 2025). Signature Style Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities. You can follow him on X (formerly Twitter) at @ieuditmisra ... Read More Tags:Explained EconomicsExpress Explained