Over the last 10 years, Telangana has often made national headlines. Its per capita income has gone up three times to ₹3.47 lakh far surpassing the national average. It muscled its way to be amongst the top-5 producers of paddy in the country. At ₹14.63 lakh crore, the GSDP (Gross State Domestic Product) grew by 12 per cent over the last year, beating the national average of 9.1 per cent.
But during the period, the State’s financial health was hit as its debt increased to ₹6.71 lakh crore in 2023-24 from ₹72,000 crore.
As he presented the Budget on Thursday, Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramaka indicated the debt burden and the cost of debt servicing on the exchequer.
The Socio-Economic Outlook had dealt with the issue in detail. In 2015-16, the State’s debt-to-GSDP ratio was one of the lowest in the country at 15.7 per cent. By 2023-24, this ratio had nearly doubled to 27.8 per cent, surpassing the 25 per cent limit set by the Fiscal Responsibility and Budget Management (FRBM) Act. The Act bars the States from borrowing beyond the limit to protect them from collapsing financially.
Committed expenditure
The State’s ability to spend on capital expenditure is further impacted by the sharp increase in the committed expenses (salaries and pensions). This has increased to ₹60,168 crore, which is nearly half of the State’s revenue receipts of ₹1.27 lakh crore.
This means it will be left with only half of its receipts to attend to these committed expenses. If you add the debt servicing component of ₹19,161 crore, the money available in hand will be much less. The burden of servicing budgetary and off-budget borrowings has grown substantially, now consuming 34% of the State’s revenue receipts in 2023-24.
Moreover, the FM will have to provide for ₹53,000 crore to meet the Abhaya Hastam (Six Guarantees). This will make the Government go for additional borrowings, which would force the State to go for more loans.
The State, which borrowed ₹45,000 crore in 2020-21, is planning to raise ₹68,525 crore in loans and borrowings to plug the yawning gap, caught in a vicious cycle.