The Tamil Nadu Fiscal Responsibilty Act 2003

TAMIL NADU FISCAL RESPONSIBILITY ACT, 2003 
(ACT XVI OF 2003) 
(Further Amended in 2023) 
 
An Act to provide that it shall be the responsibility of the State Government to ensure 
fiscal stability and sustainability, and to enhance the scope for improving soci al and physical 
infrastructure and human development by achieving sufficient revenue surplus, reducing 
fiscal deficit and removing impediments to the effective conduct of fiscal policy and prudent 
debt management through limits on State Government's borrow ings, debts and deficits, 
greater transparency in fiscal framework and for matters connected therewith or incidental 
thereto. 
 
BE it enacted by the Legislative Assembly of the State of Tamil  Nadu in the Fifty –
fourth Year of the Republic of India as follows:- 
 
1. Short title and commencement. 
 
(1) This Act may be called the Tamil Nadu Fiscal Responsibility   
Act, 2003. 
(2) It shall come into force on such date as the State Government  
may, by notification, appoint. 
 
2. Definitions. 
 
In this Act, unless the context otherwise requires- 
 
(a) "Budget" means the Annual Financial Statement laid before the Legislative 
Assembly under Article 202 of the Constitution; 
 
(b) "Current Year" means the financial year preceding the ensuing year; 
 
(c) "Ensuing Year" means the financial year for which the budget is being 
presented; 
 
(d) "Financial Year" means the year beginning on the 1 st April and ending on the 
31st March next following; 
 
(e) "Fiscal Deficit " means the excess of – total disbursements from the 
Consolidated Fund of the State (excluding repayment  of debt) over total 
receipts into the Consolidated Fund excluding the debt receipts during a 
financial year; 
  
(f) "Fiscal Indicators " means the measures such as numerical ceilings and 
proportions to Gross State Domestic Product, as may be prescribed, for 
evaluation of the fiscal position of the State Government; 
 
(g) "Previous Year" means the financial year preceding the current year; 
 
(gg) “Revenue Deficit” means the excess of revenue expenditure   
        over revenue receipt; 
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(h) "Total Liabilities " means the lia bilities under the Consolidated Fund of the 
State and the Public Account of the State. 
 
3. Medium Term Fiscal Plan to be laid before the Legislature. 
 
     (1)  The   State   Government shall lay before the Legislative    
Assembly a Medium Term Fiscal Plan along with the Budget. 
 
(2) The Medium Term Fiscal Plan shall set forth a multi -year rolling target for the 
prescribed fiscal indicators with specification of underlying assumptions. 
 
(3)  In particular and without prejudice to the provisions contained in sub -section 
(2), the Medium Term Fiscal Plan shall include an assessment of sustainability 
relating to,- 
 
(i) the balance between revenue receipts and revenue expenditure; 
 
(ii) the use of capital receipts including borrowings for generating productive 
assets. 
     
     (4) The Medium Term Fiscal Plan shall, inter-alia, contain,- 
 
(a) the medium term fiscal objectives of the State Government; 
 
(b) an evaluation of the performance of the prescribed fiscal indicators in the 
previous year vis-à-vis the targets set out earlier, and the likely performance in 
the current year as per revised estimates. 
 
(c) a statement on recent economic trends and future prospects for growth and 
development affecting fiscal position of the State Government. 
 
(d) the strategic priorities of the State Government in the fiscal matters for the 
ensuing financial year; 
 
(e) the policies of the State Government for the ensuing financial year relating 
to taxation, expenditure, borrowings and other liabilities, lending and 
investments, pricing of adm inistered goods and services and description of 
other activities, such as guarantees and activities of Public Sector 
Undertakings which have potential budgetary implications and the key fiscal 
measures and targets pertaining to each of these; 
 
(f) an evaluation as to how the current policies of the State Government are in 
conformity with the fiscal management principles set out in section 4 and the 
fiscal objectives set out in the Medium Term Fiscal Plan. 
 
(5) The Medium Term Fiscal Plan shall be in such form as may be prescribed. 
 
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4. Fiscal Management Principles 
  (1) The State Government shall take appropriate measures   to   manage   the 
revenue deficit, fiscal deficit and outstanding debt to sustainable levels. 
  (2) The State Government shall – 
(a) reduce the ratio of revenue deficit to revenue receipt every year by three 
per cent to five per cent depending on the economic situation in that year beginning 
from financial year 2002 -2003 and e liminate revenue deficit by 2025-20261 and 
adhere to it thereafter; 
 
 (b) maintain the ratio of fiscal deficit to Gross State Domestic Product as not  
more than three per cent by 31st March 20251 and adhere to it thereafter;  
(bb) maintain the ratio of total outstanding debt to Gross State Domestic 
Product with medium t erm goal of not being more than 24.5 per cent during  
2011-2012; 24.8 per cent during 2012-2013; 25.0 per cent during 2013-2014; 25.2 per 
cent during 2014-2015 and thereafter maintain such per cent as may be prescribed”. 
 
 (c) cap the total outstanding guarantees to hundred per cent of the total 
revenue receipt in the preceding year or at ten per cent of Gross State Domestic 
Product, whichever is lower; 
 
 (d) cap the risk weighted guarantees to seventy five per cent of the total 
revenue receipt in the preceding year or at seven and half  
per cent of Gross State Domestic Product, whichever is lower. 
 
Provided that revenue deficit and fiscal deficit may exceed the limits specified 
under this sub -section due to ground or grounds of unforeseen demands on the 
finances of the State Government due to national security or natural calamity subject 
to the condition that the  excess beyond limits arising due to natural calamities does 
not exceed the actual fiscal cost that can be attributed to the calamities: 
 
Provided further that the ground or grounds specified in the first proviso shall 
be placed before the Legislative Assembly as soon as may be, after it becomes likely 
that such deficit amount may exceed the aforesaid limits, with an accompanying 
report stating the likely extent of excess, and reasons therefor. 
5. Measures for Fiscal Transparency 
(1)  The State Government shall take  suitable measures to ensure greater 
transparency in its fiscal operations, in public interest, in the preparation of the 
Budget. 
(2) The Stat e Government shall, at the time of presentation of the Budget, 
disclose in a statement in the form as may be prescribed,- 
(a)  the significant changes in the accounting standards, policies and 
practices affecting or likely to affect the computation of prescribed fiscal 
indicators; 
                                                 
1 Substituted by Tamil Nadu Fiscal Responsibility (Amendment) Act 202 3 (Tamil Nadu Act No.1 4 of  2023) 
Section 4 (a) and (b) with effect from 4th day of May  2023 and published i n Part IV Section 2 of the Tamil 
Nadu Gazette Extraordinary No.165 dated 4th May 2023.   
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(b) as far as practicable and consistent with protection of public interest, the 
contingent liabilities created by way of guarantees. 
 
(c)  detail number of employees in Government, Public Sector Undertakings 
and aided institutions and related salaries. 
 
6. Measures to enforce compliance 
 
  (1) The Budget and policies announced at the time of the budget, shall be 
consistent with objectives and targets specified in the Medium Term Fiscal Plan for 
the coming and future years. 
 
       (2) The Minis ter in charge of the Department of Finance shall review every 
half year, the trends in receipts and expenditure in relation to the budget, remedial 
measures to be taken to achieve the budget targets and place before the Legislative 
Assembly the outcome of such reviews. 
 
(3) While placing before the Legislative Assembly the outcome of such 
review, the Minister shall make a statement explaining,- 
 
(a) any deviation in meeting the obligations cast on the State Government 
under this Act; 
(b) whether such deviation is s ubstantial and relates to the actual or the 
potential budgetary outcomes; and 
(c) the remedial measures the State Government proposes to take. 
 
(4) Whenever outstanding risk weighted guarantees exceed the limits specified in 
section 4, no fresh guarantee shall be given. 
 
(5) Any measure proposed in the course of the financial year, which may lead to 
an increase in revenue deficit, either through enhanced expenditure or loss of revenue, 
shall be accompanied by remedial measures, which will neutralize such increa se or 
loss and such measures shall be clearly mentioned. 
 
(6) The State Government may assign an independent external agency to carry out 
the periodical review for the compliance of the provisions of this Act in the manner, 
as may be prescribed. 
 
7. Power to make rules 
 
(1) The State Government may make r ules to carry out all or any of the purposes 
of this Act. 
 
(2) Every rule or order made under this Act shall, as soon as possible, after it is 
made, be placed on the table of the Legislative Assembly and if, before th e expiry of 
the session in which it is so placed or in the next session, the Assembly makes any 
modification in any such rule or order, or the Assembly decides that the rule or order 
should not be made, the rule or order shall thereafter have effect only i n such 
modified form or be of no effect, as the case may be, so, however, that any such 
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modification or annulment shall be without prejudice to the validity of anything 
previously done under that rule or order. 
 
8. Protection of action taken in good faith 
 
No suit, prosecution or other legal proceeding shall lie against the State 
Government or any officer of the State Government for anything which is in good faith 
done or intended to be done under this Act or the rules made there under. 
 
9. Application of other laws not barred. 
 
The provisions of this Act shall be in addition to, and not in derogation of, the 
provisions of any other law for the time being in force. 
 
10. Power to remove difficulties. 
 
If any difficulty arises in giving effect to the provisions of this Act, the State 
Government may, by order published in the Tamilnadu Government Gazette  make such 
provisions not inconsistent with the provisions of this Act, as may appear to them to be 
necessary or expedient for removing the difficulty: 
 
 
Provided that no order shall be made after the expiry of a period of two years from the 
date of commencement of this Act. 
 
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