Over the last decade, Telangana has been in the national headlines many times. Its per capita income has increased threefold to Rs 3.47 lakh, far exceeding the national average. It has clawed its way to be among the top five rice producers in the country. At Rs 14.63 lakh crore, the GSDP (Gross State Domestic Product) grew by 12 per cent in the last year, surpassing the national average of 9.1 per cent.
But during this period, the state’s financial health has taken a hit with its debt falling from Rs 72,000 crore to Rs 6.71 lakh crore in 2023-24.
Presenting the budget on Thursday, Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramaka highlighted the debt burden and the cost of servicing the debt to the exchequer.
The Socio-Economic Outlook has covered the issue in detail. In 2015-16, the government’s debt-to-GDP ratio was one of the lowest in the country, at 15.7%. By 2023-24, the ratio had almost doubled to 27.8%, exceeding the 25% limit set by the Fiscal Responsibility and Budget Management (FRBM) Act. The act prohibits states from borrowing beyond this limit to protect them from financial collapse.
Expenditures
The state’s ability to invest in capital expenditure is also affected by the sharp increase in committed expenditure (wages and pensions). These have increased to Rs 60,168 crore, which is almost half of the state’s tax revenue of Rs 1,270,000 crore.
This means that it will have only half of its revenue left to meet these incurred expenditures. Add to this the debt servicing of Rs 19,161 crore and the money available will be much less. The burden of servicing budgetary and off-budget borrowings has increased considerably, now consuming 34% of the state’s tax revenues in 2023-24.
In addition, the Finance Minister will have to set aside Rs 53,000 crore to meet the six guarantees (Abhaya Hastam). This will force the government to resort to additional borrowing, which would force the state to take more loans.
The state, which borrowed Rs 45,000 crore in 2020-21, plans to raise Rs 68,525 crore in loans and borrowings to plug the gaping gap, caught in a vicious circle.