A newly released white paper on Andhra Pradesh's state finances highlights severe fiscal challenges. As of June 12, 2024, the state's debt and liabilities have surged to ₹9.74 lakh crore, with an additional ₹3,542 crore in liabilities due to court orders. Chief Minister Chandrababu Naidu faces significant hurdles in addressing this financial strain.
Financial Overview
The white paper reveals a daunting ₹1,46,909 crore budget gap for the fiscal year 2024-25. This deficit is primarily due to essential expenditure dues to vendors, ongoing schemes, and obligations to state employees. The document calls for robust discussion and debate to find both immediate and long-term solutions for Andhra Pradesh’s financial stability.
Chief Minister Naidu attributes the current financial woes to mismanagement by the previous government. Despite these challenges, he remains optimistic, emphasizing the need for public support and participation to steer the state towards progress.
Economic Decline
The white paper points to a significant decline in Andhra Pradesh's Gross State Domestic Product (GSDP) from 2019 to 2024, resulting in a loss of approximately ₹6.94 lakh crore. It suggests that maintaining a 13.5% growth rate could have generated an additional ₹76,195 crore in revenue. Even considering the COVID-19 impact, the state should have seen an extra ₹52,197 crore in revenue.
DBT Schemes and Per Capita Income
The implementation of Direct Benefit Transfer (DBT) schemes, aimed at boosting wealth among citizens, fell short of expectations. The report indicates that increased DBT expenditure led to higher state borrowings, raising the per capita debt burden. This highlights a critical flaw in the scheme's execution, which failed to deliver the anticipated economic benefits.
Legacy of Bifurcation
The financial strain is exacerbated by the long-term effects of Andhra Pradesh's bifurcation. The state inherited 46% of combined tax revenue but 58% of the population, leading to a significant reduction in per capita income compared to Telangana. The white paper emphasizes the uneven allocation of public finances during bifurcation, placing Andhra Pradesh at a disadvantage with lower revenue and higher expenditure responsibilities.
Path to Recovery
Addressing these challenges requires a multifaceted approach. The state government needs to implement stringent fiscal reforms, prioritize essential expenditures, and explore innovative revenue generation strategies. Building a sustainable financial model involves reducing unnecessary expenses, improving tax collection efficiency, and fostering economic activities to spur growth. Engaging with stakeholders, including the public, industry leaders, and financial experts, is crucial for crafting policies that drive long-term economic stability.
Chief Minister Naidu's administration must enhance transparency and accountability in financial management. Strengthening institutional frameworks for monitoring and controlling public spending, along with implementing robust financial planning and budgeting processes, is vital. Leveraging technology for efficient resource management and adopting best practices from other states and countries can provide valuable insights and strategies for Andhra Pradesh's fiscal recovery.
The white paper on Andhra Pradesh's state finances presents a sobering assessment of the current fiscal landscape. With high debt levels, a substantial budget gap, and lingering effects of past economic policies and state bifurcation, the challenges are significant. However, with strategic planning, inclusive dialogue, and determined leadership, there is potential to overcome these hurdles. Through collective effort and prudent financial management, Andhra Pradesh can rebuild its economic foundation and achieve sustainable growth in the coming years.
