Will Jagan lead AP to financial bankruptcy with his mindless borrowing?


The AP government’s financial profligacy and extensive borrowing is now the hottest topic of discussion among the financial experts in both the state as well as in New Delhi. The AP government’s indiscriminate borrowing is now being seen as a perfect recipe for financial disaster.

What is worse, the Jagan government is fudging figures and is showing the borrowings under various heads to escape the provisions of the FRBM act.

The Fiscal Responsibility and Budget Management (FRBM) Act 2003 sets a target for the governments to establish financial discipline in the economy, improve the management of public funds and reduce fiscal deficit. However, the AP government is borrowing way too beyond its permitted levels. For instance, of the Rs 19100 crore borrowings of YS Jagan Mohan Reddy government, Rs 4100 crore have been secured by pledging the government assets. It also has to pay Rs 3470 crore towards the pending amount of the overdrafts taken.

Due to the financial mismanagement the AP government’s permissible borrowing limit has been brought down from Rs 42000 crore to Rs 20000 crore. Of this, already the State government has taken Rs 18100 crore. So, paying of the salaries too is now a Herculean task for this government. According to conservative estimates, the AP government is borrowing at the rate of Rs 6000 crore per month.

Bent on circumventing the system, the AP government has set up several corporations and borrowing in their name heavily. For these borrowings the government is pledging its assets as counter guarantees. These borrowings are known as off-budget borrowings. These figures are not shown in the overall budget. Thus, by clever fudging of figures, the state is on a borrowing spree. These corporations have little staff but huge budgets and the loans taken are diverted to the state government. Experts say that the AP government is likely to go bankrupt if the same trend of financial mismanagement continues.

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