Debt numbers alone do not define economic health, says Chidambaram defending Tamil Nadu

Senior Congress leader and former Union finance minister P. Chidambaram on Thursday argued that judging a state’s economic health purely by the size of its debt presents a distorted picture, insisting that such assessments ignore key economic fundamentals.

In a New Year statement, Chidambaram said the rise in public debt was a global trend and should not be selectively used to criticise states such as Tamil Nadu. He pointed out that major developed economies, including the United States, the United Kingdom, Japan, France and Canada, continue to see their public debt expand year after year.

“The same pattern exists in India,” he said, noting that both the country’s overall debt and the combined borrowing of all states increase annually. “This, by itself, is not unusual or alarming.”

According to Chidambaram, the more meaningful indicator of fiscal health is the ratio of debt to gross domestic product, rather than the absolute size of liabilities. “The accepted yardstick is the debt-to-GDP ratio,” he said, adding that Tamil Nadu’s debt-to-GSDP ratio has remained broadly stable between 2021–22 and 2025–26.

He also highlighted projections showing a gradual narrowing of the state’s fiscal deficit, with Tamil Nadu on course to meet the NITI Aayog target of capping the deficit at three per cent of GSDP by 2025–26. “This reflects a measure of fiscal discipline and responsible management,” Chidambaram said.

While conceding that there is always room to improve financial governance, he criticised comparisons between Tamil Nadu and Uttar Pradesh as misleading. Such comparisons, he argued, overlook fundamental differences in economic structure, revenue capacity and development trajectories between the two states.

His remarks come amid a political row sparked by comments from Congress leader and data analyst Praveen Chakravarty, who had earlier flagged Tamil Nadu’s rising debt in comparison with Uttar Pradesh. The remarks drew strong reactions from the ruling DMK, prompting Chidambaram to step in and clarify the Congress party’s position.

The former minister’s intervention is being seen as an effort to underline confidence in Tamil Nadu’s fiscal management while also easing tensions within the opposition INDIA bloc at a politically sensitive time.

With IANS inputs