High GSDP growth need not translate into fiscal health. Critically examine this statement with reference to Tamil Nadu's 2024-25 CAG State Finances report.

Fiscal health is measured not by the size of output but by the quality of the balance sheet financing it. The CAG's State Finances report for 2024-25, tabled in the Tamil Nadu Assembly on 8 September 2026, records buoyant growth alongside a persistent revenue deficit and rising committed spending — validating the statement, though not wholly.

Where growth does signal fiscal strength

• Accelerating output: TN's GSDP grew 15.98% in 2024-25, up from 13.34% the previous year, widening the base for own tax revenue [1].
• Economic weight: the State contributes about 9.43% of national GDP and stays above the national average in per capita income, indicating structural resilience [1].
• Ceiling compliance: debt at 27.38% of GSDP remains below the 28.90% limit set jointly by the 15th Finance Commission's glide path [3] and the Tamil Nadu Fiscal Responsibility Act, 2003 — faster nominal growth itself flatters this ratio [1].

Where growth masks fiscal stress

• Revenue deficit persists: it rose to ₹45,840 crore from ₹45,121 crore, meaning current expenditure is still met by borrowing — a structural, not cyclical, gap [1]. PRS also placed the budgeted revenue deficit near 1.6% of GSDP [2].
• Rigid expenditure: committed spending on salaries, pensions and interest touched ₹1,76,676 crore, or 53.75% of revenue expenditure and 62.47% of revenue receipts, shrinking discretionary space [1].
• Debt servicing crowd-out: interest payments absorb nearly 21% of revenue receipts and have climbed since 2022-23, diverting funds from capital formation [1].
• Thin headroom: a debt stock of ₹8.53 lakh crore sitting just under the ceiling leaves little cushion against a growth slowdown [1].

Tamil Nadu thus illustrates that growth expands fiscal capacity but does not automatically improve fiscal quality; the two diverge when borrowing funds consumption. Restoring revenue balance through better own-revenue mobilisation, expenditure rationalisation and a higher capital-outlay share would convert growth into durable fiscal health — the very sustainability the Finance Commission's glide path seeks.