Andhra Pradesh is facing a grave financial crisis with empty coffers and huge debts.
While the crisis has its genesis in the state’s bifurcation, the problems were compounded by the Centre not honouring its commitments and the YSR Congress Party (YSRCP) government failing to mount pressure on the BJP-led government at the Centre. The Covid-19 pandemic only added to the financial woes, analysts say.
The state is not only struggling to pay salaries and pensions, the empty coffers have also hit some schemes and the work on infrastructure projects.
Andhra Pradesh is one of the most indebted states in the country. According to a recent report of the Reserve Bank of India (RBI), the state’s outstanding debts stand at Rs 3.98 lakh crore. Its debt to GSDP ratio stands at 37.6 per cent, the fourth highest among the states.
According to the Comptroller and Auditor General (CAG) statistics last year, Andhra Pradesh had a debt burden of Rs 3.37 lakh crore. It also revealed that during 2020-21, the state borrowed Rs 9,226 crore an average per month, mainly to pay the salaries, pensions and foot the freebies bill. The same trend is believed to have continued during 2021-22.
Andhra Pradesh’s debt burden at the time of bifurcation in 2014 was Rs 97,000 crore. In five years till March 2019, it jumped to nearly Rs 2.59 lakh crore. The YSRCP government, which came to power in May 2019, borrowed another Rs 1.40 lakh crore from banks and other sources. The situation has reached a stage where there are fears that the state may require to raise loans even for debt servicing.
For 2021-22, the government had targeted to borrow Rs 50,525 crore but the borrowing exceeded the target. For debt servicing alone, the government earmarked Rs 23,205 crore in the 2021-22 budget.
The ruling YSRCP and main opposition TDP are engaged in a blame game over the financial crunch. While the YSRCP says it inherited a bad financial situation from the TDP, the latter alleges that the Jagan Mohan Reddy government is indulging in financial irregularities, budget violations and fiscal indiscipline.
The TDP has even demanded that the state government constitute a fiscal council with experts as its members to monitor the revenue and expenditure of the state.
Senior TDP leader and former state finance minister Yanamala Ramakrishnudu recalled that financial expert N K Singh, who was on the review committee of the Fiscal Responsibility and Budget Management (FRBM) Act, had recommended formation of the fiscal council to bring financial discipline among the states.
The fiscal council would scrutinise the implementation of the budget manual and control the public expenditure on a regular basis.
Ramakrishnudu argues that if the fiscal council is formed, the Jagan Mohan Reddy government would not be able to take massive loans by violating the FRBM norms.
Finance minister Bugganna Rajendranath rejected the demand for a fiscal council saying that the Union government itself has made it clear in Parliament that there is no need for a fiscal council, when there is CAG, Finance Commission and statistical institutions.
The government claims that despite the financial constraints and the Covid-19 impact on the economy, the state was doing well. It pointed out that during 2020-21 the GSDP registered a growth of 1.58 per cent, which is higher than the previous year’s negative growth of the national GDP at -3.80 per cent. The per capita income of the state also increased to Rs 1.70 lakh per annum in 2020-21 as against Rs 1.68 lakh in 2019-20.
For 2021-22, the state presented an annual budget of Rs 2.29 lakh crore. The revenue deficit was estimated at Rs 5,000 crore while the fiscal deficit was estimated to be Rs 37,029 crore, which is one of the highest in the country.
The government earmarked a whopping Rs 48,083 crore for 22 freebie schemes.
The TDP alleges that revenue deficit and debts had increased manifold in the past three years. “The double digit growth rate of 10.22 per cent under the TDP rule came down to -2.58 per cent. This was enough to show the extent of the financial crisis caused till now,” said Ramakrishnudu.
Finance minister Rajendranath, however, questioned how the opposition can compare a Covid pandemic affected fiscal with a normal one. He pointed out that due to the Covid pandemic, the state lost its own revenues to the tune of Rs 8,000 crore in the 2020-21 financial year. “At the same time, the state has spent an additional Rs 7,120 crore for Covid control. Notwithstanding the difficulties, the state is implementing the budget as per the FRBM rules,” he said recently.
Blaming the previous TDP regime for the present economic crisis being faced by the state, he said the TDP has no moral grounds to point fingers at the YSRCP government. “If not for the burden of unpaid bills and additional loans taken and unscrupulous tender processes, today’s situation would not have been there,” he said.
The former chief secretary of Andhra Pradesh and BJP leader IYR Krishna Rao blamed the YSRCP government’s welfare schemes for what he calls one of the worst financial positions ever. He alleged that the government is draining all of its revenues for the schemes.
Calling the populist schemes of YSRCP unviable, Krishna Rao is of the view that the Election Commission should introduce a rule wherein a party should show its state’s income to prove that it would be able to fulfil its promises when it comes to power.
Economist Papa Rao pointed out that the state’s financial problems arose out of bifurcation. “After bifurcation, the state suffered financial injustice. Since it was a revenue deficit state, the central government made many commitments in the Andhra Pradesh Reorganisation Act 2014 to bridge the deficit. From funds for Polavaram to a steel factory in Kadapa and from special category status to a package for the backward areas, several commitments were made but none of them has been fulfilled,” he said.
He believes that the YSRCP government is clueless about how to overcome the crisis and it is making mistakes while trying to mobilize resources to implement various welfare schemes.
According to him, the Jagan Mohan Reddy government despite winning a massive mandate in 2019 failed to mount pressure on the Centre to fulfil its commitments.
“People gave 151 seats to YSRCP in the 175-member Assembly and with this support it should have sincerely fought with the Centre but it appears it has compromised due to its own compulsions,” he said referring to the pending cases against Jagan Mohan Reddy and the heat being turned on him by the Chandrababu Naidu-led TDP.
