Telangana vs Andhra: A comparison of their fiscal situation and more

Both Telangana and Andhra, economists say, need to per force be proactive as they are coping with the consequences of bifurcation, which is not the case when comparing other states and their performance. The source for the tables below is 'Centre for Economic and Social Studies' in Hyderabad along with pointers giving analysis comparing the two states by N Sreedevi, Associate Professor, Centre for Economic and Social Studies.

The Fiscal Situation of Andhra Pradesh and Telangana

The overall budgetary position of the two states, when compared, shows that

• Telangana State started its budget with a positive opening balance. Of the total receipts the state has higher proportion of revenue rceipts and lower proportion of public debt. Reverse situation found in New Andhra Pradesh (AP).
• Subsequently AP's dependence not only on central transfers but also on capital receipts, which are mostly borrowings is glaring both in absolute values as well as in proportions.
• Relatively higher revenue expenditure and public debt repayment burden kept the share of capital expenditure of AP below 10 percent. However, the proportion of capital expenditure showed an increasing trend. While marginal increase in revenue expenditure and debt repayment compelled Telangana state to bring down the estimates of its capital expenditure.
• The net effect is reflected in the estimated closing balance of both the states.
  

RECEIPTS

• In exploring the revenue potentiality of the state, AP is focusing on Sale Proceeds of Waste Lands & Redemption of Land Tax, one of the own tax revenues of the state. Whereas Telangana is focusing on Sale of Land & Property which is under Miscellaneous General Services i.e. own non-tax revenue.
• In the case of Telangana, the estimated budget expenditure in the year 2015-16, though increased by 15 percent over previous year, it is mainly due to the increased debt repayment /interest payments and revenue expenditure. The composition of expenditure also reiterate the same.
• Irrespective of the arguments over the plan and non-plan conundrum, the proportion of plan expenditure very low in AP whereas in Telangana the gap between the proportion of plan and non-plan is narrower than that of AP.
• The fiscal situation of Telangana State though showed revenue surplus situation, it is only nominal and might have maintained mainly because of the binding factor with the FRBM Act. Conversely, AP showed a deficit situation.  
• The major challenge for both the states is to face in the forthcoming year (s) is to face the fund flow to meet the various schemes announced by the respective governments along with the regular recurring expenditure. While nominal maintenance of revenue surplus situation may not finance capital expenditure on the economic or social activities, cap on fiscal deficit and debt stock, as per the Finance Commission, restrict the scope of state borrowings ultimately affecting the resource inflow, allocations/expenditure outflow towards the activities of the state. Hence Fiscal discipline is need of the hour. Irregularities need to be minimized for revenue augmentation as well as expenditure side.