Andhra Pradesh Finance Minister Payyavula Keshav presents the budget in the Legislative Assembly. Photo: Special Arrangement
After presenting two vote-on-account Budgets, Andhra Pradesh Finance Minister Payyavula Keshav presented the annual Budget for the financial year 2024-25 on November 11. The annual Budget, fiscal policy statement and Comptroller Auditor General (CAG) reports tabled in the A.P. Assembly paint a grim picture of the State’s finances, and the National Democratic Alliance (NDA) government will have to cross many hurdles if it is to fulfil its promises — particularly the ‘Super Six’, made during the run-up to the 2024 general election.
Second, going by fiscal trends, the State finances are heavily stressed. Third, the State government has to augment its resources, to repay within the next seven years, 39.15% of the debt, which now stands at ₹1,39,567.14 crore.
A cursory look at the Budget document indicates a decision to postpone implementation of some key electoral promises. The Budget provides limited scope for ambitious projects. The government has not allocated any funds for the poll promises except for ‘Deepam 2.0’ and ‘Talliki vandanam’. There is an allocation of ₹2,684 crore for the ‘Deepam 2.0 scheme’ and ₹6,500 crore for ‘Talliki vandanam’, a poll promise of ₹15,000 a year to each school-going child. There is no mention of the other major poll promises including a ₹1,500 monthly pension for women (19 to 59 years); the creation of 20 lakh jobs, a ₹3,000 monthly unemployment allowance, and also free bus travel for women. The cost of implementing all these major poll promises is an estimated ₹74,000 crore an annum. Despite financial challenges, the NDA government has managed to allocate ₹85,577 crore for welfare, focusing on women and children, minorities, Backward Classes, Scheduled Castes and Scheduled Tribes.
Impact of debt liabilities
Restoring A.P.’s financial status to a state of health will be an arduous task. The government will have to focus on debt liabilities. The State’s total debt at the end of FY2022-23 was 32.17% of the Gross State Domestic Product (GSDP); but when off-Budget borrowings are included, it amounts to 43.80%, exceeding Fiscal Responsibility and Budget Management limits. The public debt-GSDP ratio of Andhra Pradesh increased from 22.15% in 2018-19 to 27.05% in 2022-23. The State projects a fiscal deficit of 4.3%, which exceeds the Finance Commission’s recommended 3%. This raises questions about Andhra Pradesh’s borrowing capacity and its ability to pump in money for projects such as ‘Capital Amaravati’.
The government has secured funding of ₹15,000 crore from multilateral funding agencies through the central government for developing the trunk infrastructure in the dream city of Amaravati, that was abandoned for five years. The financial assistance from external agencies for Amaravati will be in the form of a loan, which again impacts future financial commitment.
There has been a massive cut on financial outgo when it comes to the predecessor YSR Congress Party (YSRCP) government’s populist measures and schemes. The Budget has hinted at a paradigm shift to develop infrastructure. Despite this, the capital expenditure is estimated to be ₹32,712.84 crore, while the revenue expenditure is estimated at ₹2,35,916.99 crore.
Mr. Keshav said, “What we are doing is aimed at restarting the financial wheels of the state.” There is no clear road map how the government proposes to do this. Instead, the Budget says that the government would have to raise ₹71,000 crore from open market borrowings out of the total outlay of ₹2.94 lakh crore. A CAG report (2022-24) has said “the finances …is marked by increasing trend of liabilities (debt, guarantees, off-budget borrowings, etc.) which pose (a) risk to (the) target of debt stabilisation and debt sustainability.” The State has a committed expenditure of nearly ₹1.30 lakh crore annually towards salaries, pensions, loan repayments and interests. The salaries of 11.79 lakh employees and 3.59 lakh pensioners are ₹57,827 crore and ₹21,696 crore, respectively; salaries and pensions will be ₹79,523 crore. Interest payments and debt servicing is around ₹29,295 crore.
The government also needs to bring down the dependency on borrowed funds and formulate a debt management strategy. The focus must be towards wealth creation rather than just bridging the revenue or fiscal deficits.
Published – November 28, 2024 12:40 am IST