The Andhra Pradesh government presented a Budget of more than ₹3.22 lakh crore for FY2025-26. The fiscal trends, revenue and fiscal deficits, and amount of public debt show that the State’s finances are severely stressed. It looks like the government is staring at tough days ahead.
Public debt, the total amount of money that a government borrows to fund its spending, is estimated to increase to ₹1.02 lakh crore in FY2025-26. Andhra Pradesh will be witnessing a quantum jump of more than ₹25,000 crore in public debt in just one year. Public debt as a percentage of GSDP was ₹4.91 lakh crore in FY2023-24 and has increased to ₹5.60 lakh crore in 2024-25. The Budget Estimate (BE) of public debt as a percentage of GSDP for FY2025-26 is ₹6.40 lakh crore.
According to experts, the surge in public debt is largely due to “freebies, fewer tax revenues, and meagre capital expenditure.” They say that the government has not focused on physical infrastructure and human infrastructure, such as health and education, and advise it to bring down fiscal deficit.
According to Budget documents, 18% of government expenditure goes towards interest and principal repayment. The government will have to pay more than ₹44,000 crore on interest and principal payments per annum if the fiscal deficit of ₹79,926 crore and revenue deficit of ₹33,185 crore are to be considered.
Tax revenues are not increasing to match the burgeoning expenditure on welfare schemes. The government spends 18% on welfare, 11% on education and 6% on health.
Given the grim state of finances, the government may find it difficult to implement its electoral promises. The Budget document indicates that the government has decided to postpone the implementation of some of its key promises. The Budget also provides limited scope for ambitious infrastructure projects.
For the Annadata Sukhibhava scheme, to provide ₹20,000 to every farmer, the government has allotted ₹6,300 crore. It has allocated ₹9,407 crore for the Thalli Ki Vandnam scheme, under which each student in a family will receive ₹15,000. The government has also announced that it will revive the Aadarana scheme to support artisans, craftsmen, and other traditional occupations by allocating ₹1,000 crore to it.
The government mentioned Godavari-Banakacherla, an ambitious intra-linking of rivers initiative with an estimated cost of over ₹80,000 crore. But no funds seem to have been allocated for this project.
The pressing need is to increase capital expenditure to fuel growth and development. Finance Minister Payyavula Keshav said in his Budget speech, “Capital expenditure for the government means expenditure on irrigation, roads, dams, etc., which gives returns in future This is the goal of capital expenditure.” However, the Budget figures present a different picture. Of a total outlay of ₹3,22,359 crore, capital expenditure is estimated at a mere ₹40,635 crore and revenue expenditure is estimated at ₹2,51,162 crore. To overcome resource constraints, the government seems to have come up with a viability gap funding scheme, with a corpus of ₹2,000 crore.
The Finance Minister said, “Economic growth is back on track.” Nevertheless, there is a gap between the BE and the Revised Estimates (RE) for revenue receipts in FY2024-25. The government estimated that revenue receipts would be ₹2,01,173.61 crore. The RE points out that the receipts, however, stood at ₹1,76,031 crore. While the BE for tax revenue were ₹1,09,789.18 crore, the RE stood at ₹94,966.53 crore during FY2024-25. Similarly, non-tax revenues stood at ₹7,018.05 crore in RE as against ₹10,576 crore in BE for FY2024-25.
At this juncture, restoring Andhra Pradesh’s financial status is an arduous task for the government. The government has not hinted at how it plans to improve state-owned resources and bring down debt liabilities.
It is clear that government will have to augment its revenue resources. It also needs to bring down the dependency on borrowed funds for financing revenue/current expenditure and formulate a debt management strategy. The debts raised should be utilised for creating wealth rather than bridging the revenue or fiscal deficit. The government has to balance fiscal discipline with ambitious promises.
Published – March 13, 2025 01:30 am IST
