Telangana, Andhra need funds post Budgets, say economists

Newly formed state Telangana presented its maiden Budget on Wednesday. Both states of Telangana and Andhra have now presented Budgets with no new taxes.

Incidentally, each Budget has an outlay of around Rs 1 lakh crore.

"Both the states have fiscal challenges to deal with so the focus in both cases will have to be on mobilization of resources," says Professor S. Galab, economist and Director of the Centre for Economic and Social Studies (CESS).

He points out that while Telangana has shown a revenue surplus of Rs 301 crore and a fiscal deficit of Rs 17,398 crore (4.79 per cent of Gross State Domestic Product), the Andhra government, in its Budget in August, anticipating additional assistance of Rs 14,500 crore from the central government in the context of the state's reorganization, estimated the revenue deficit at Rs 6,064 crore and the fiscal deficit at Rs 12,064 crore (implying a fiscal deficit of 2.30 per cent of GSDP and a revenue deficit of 1.16 per cent of GSDP).

In case, it does not get those funds, then it is estimated that the fiscal deficit figure could get as high as 7.2 per cent of GSDP.

The share of plan expenditure is higher in the case of Telangana at 48 per cent as against around 24 per cent in the case of Andhra.

"As the Telangana numbers show, this seems to be a move in the right direction with greater allocation for education, health and irrigation and welfare programmes. The focus on things like the price stabilization fund and mechanization fund in agriculture or focus on solar power generation, minor irrigation and plans for input subsidies have a developmental focus," says Galab.

Economist C.H. Hanumantha Rao, who has looked at the region closely over the years, feels this sector-wise exercise in the Telangana Budget - power, irrigation, education, health care and welfare - is a novel feature for a maiden budget of a new state.

The big challenges for both states other than resource mobilization will be handling regional disparities. According to Galab, there is an added issue here in Andhra since there are political and social issues also involved and those sensitivities will have to be kept in mind. On the issue of proposed farm loan waivers and the dent on the state finances, Galab said it still needs to be seen to what extent the budgets factor in the demands on account of the proposed farm loan waivers.

Finally, both the Budgets are interim and a clear picture of where the two states stand will emerge once the full budget is announced in February next year.