Current state of AP finances

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 Fiscal Profligacy in Budgetary data:- 

According to the data released by the RBI, the outstanding liabilities of Andhra Pradesh at the end of March 2022 was RS. 3.80 Lakh crores, at the end of march 2023, it stood at RS. 4.28 lakh crores, at the end of March 2024, it reached RS.4.85 Lakh crores (RBI, 2023). We can also witness a significant growth in Gross Fiscal Deficit from RS. 25,000 crores in accounts 2022 to RS.54,587 crores as per BE 2024. At present, Andhra Pradesh's debt to Gross State domestic product is 33.5 percent. Moreover the Andhra Pradesh Government had played a smart game because, if we go through the data once again at the end of march 2023, the maturity profile of outstanding State Government Securities, 4.5 % of securities will mature in 1 year, 29.3% securities in 1 to 5 years, 28.5% securities in 5 to 10 years, 38.5% of securities in 10 to 20 years, which is implying a higher roll over risk or financial burden on state governments in the upcoming ten, twenty-thirty years (RBI, 2023). People may argue, it is followed by other rich states also, but there is a difference between Andhra pradesh and them. That is, most of the state governments are not keeping a major chunk of maturing securities in twenty- thirty years slab. 

According to C&AG report on State Finances 2022-23, there was an Excess disbursement of RS.4,027 crores which reveals inefficiency of the Budget (CAG, 2023).As per the above CAG report, 30paisa of every one rupee spent by the government is coming from loans/ public debt and government is spending 28paisa on interest payments, repayment of loans, pensions. Keeping this in mind, as declared by the AP state government in March 2024 budget, the pension liability on the government is RS.25000 crores which is going to increase on year-on-year basis, it would reach Rs.41000 crores, if we calculate then total pension liability from 2022 to 2032 is Rs. 3.15 lakh crores due to the retirement of 1.3 lakh government employees (Ap finance, n.d.). Already there was Rs.4 lakh crore outstanding liability, majority of government securities are going to mature in the upcoming 5 to 30 years, and the government is also facing a huge revenue deficit. In the next ten years, Andhra Pradesh will face a tough fiscal environment with settling of pensions, interest & repayments of loans, salaries/PRC's, welfare schemes, and other administrative costs. The government may significantly increase taxes, which may horribly impact the common people in the state. Andhra Pradesh has allocated 1.8% of its total expenditure towards roads and bridges, which is lower than the average allocation for roads and bridges by states (4.5%) (Andhra Pradesh Budget Analysis 2023-24, 2023). As a matter of fact, the government of Andhra Pradesh did not even spend 2% of it's total expenditure on roads in any financial year from 2019 to 2023 (Andhra Pradesh Budget Analysis 2023-24, 2023) Off-budgetary borrowings:- 

These are borrowings made by the government out of legislative control, these are raised by the public sector undertakings where the principal/ interest payments are repaid by the State governments. According to C&AG (2022), as of march 2021, the off- budget borrowings of Andhra pradesh is amounting to a whopping RS.86,260 crores, which would be 44% of GSDP as 35.5% reported by the State government (Andhra Pradesh Budget Analysis 2023-24, 2023). 

Poor performance in Macro-economic Indicators:- 

According to the CAG report, the revenue deficit was increased from Rs.26,000 crores in 2019-20 to Rs.43,487 crores in 2022-23 (CAG, 2023) and the fiscal deficit was increased from Rs.39,567 crores in 2019-20 to Rs.52,508 crores in 2022-23. The Fiscal Deficit constituted 25.18 per cent of total expenditure (CAG, 2023). According to BE 2023-24, Fiscal deficit is 3.8% of GSDP which is against the FRBM norms and indicates the poor performance of state government through macro-economic lens (Andhra Pradesh Budget Analysis 2023-24, 2023). 

References 

Andhra Pradesh Budget Analysis 2023-24. (2023, March 16). PRS Legislative Research. 

Retrieved April 5, 2024, from 

https://prsindia.org/budgets/states/andhra-pradesh-budget-analysis-2023-24 

Ap finance. (n.d.). GOVERNMENT OF ANDHRA PRADESH Statement of Fiscal Policy to be 

laid on the table of the A.P. State Legislature in March, 2023. AP-FINANCE. 

Retrieved April 5, 2024, from 

https://apfinance.gov.in/downloads/FRBM_2023-24_March.pdf 

CAG. (2023, March 31). ACCOUNS AT A GLANCE. Comptroller and Auditor General of 

India. Retrieved April 5, 2024, from 

https://cag.gov.in/uploads/state_accounts_report/account-report-Accounts-at-a-Glanc 

e-2022-23-065c4cd2642de21-31271010.pdf 

RBI. (2023, december 11). State Finances: A Study Of Budgets 2023-24. RBI. Retrieved 

April 5, 2024, from 

https://rbi.org.in/Scripts/Annual Publications.aspx?head-State+Finances+%3a+A+Stu 

dy+of+Budgets 
Location: Andhra Pradesh, India

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