The sum of the parts is sometimes bigger than the whole. The budgets of Andhra Pradesh and Telangana, created from the bifurcation of the erstwhile unified Andhra Pradesh, bear testimony to this.
The budgets of the two States have gone up significantly, growing well beyond what the unified State budgeted three fiscals ago.
Last week, both the States unveiled their budgets, each of which is bigger than what the unified State had in 2012-13.
Telangana’s budget for 2017-18 has shot up to ₹1.49 lakh crore and that of Andhra Pradesh is ₹1.57 lakh crore. Strikingly, both budgets are bigger than that of the unified State in 2012-13, which was ₹1.46 lakh crore.
It’s not just the budget, but even the debt of Andhra Pradesh that has shot up to ₹1.92 lakh crore, which is more than its annual budget. However, this includes ₹33,478 crore of unapportioned amount between the two States. This piled-up debt is projected to go up to ₹2.16 lakh crore in 2017-18.
A noteworthy aspect is that both the States are growing at double digits, against the country's growth of about 7 per cent. In Telangana’s case, while the budgetary allocation is huge, the revised budget estimate shows that it will be ₹1,12,191 crore, or 82 per cent of the budget of ₹1.31 lakh crore programmed for 2016-17.
Telangana’s debt burden is projected to go up to ₹1.40 lakh crore, about 18 per cent of Gross State Domestic Product (GSDP); the corresponding figure for Andhra Pradesh is 28 per cent.
The N Chandrababu Naidu government in Andhra Pradesh has been raising additional funds to develop the new capital city of Amaravati with a huge projected capital outlay, the K Chandrasekhar Rao government in Telangana is focussing on welfare measures and irrigation projects.
As the States plan to invest more in capital formation, they are looking to raise funds from market borrowings.
The Fiscal Responsibility and Budget Management Act keeps both States in check in terms of the overall borrowing cap and fiscal deficit, but both have been articulating the need for greater flexibility to raise finances.
Per-capita income
The per-capita income as a measure of people’s well-being for Telangana is projected to be ₹1,58,360 as against the national average of ₹1,03,818. In the case of Andhra Pradesh, it is ₹1,22,376.
The pile-up of debt by both Telangana and Andhra Pradesh is, however, a matter of concern. While a chunk of the funds required is being met through market borrowings, efforts are on to explore the possibility of raising funds through ‘masala bonds’.