Government of Telangana

Telangana State Finances -

White Paper

Finance Department
 Table of Contents

1 INTRODUCTION ...................................................................................... 1
2 BUDGETED VS ACTUAL EXPENDITURE OF TELANGANA.............. 4
3 RESOURCES SPENT IN THE TELANGANA REGION IN UNITED
ANDHRA PRADESH................................................................................. 9
4 TRENDS IN REVENUE RECEIPTS ........................................................ 14
5 OUTSTANDING DEBT TRENDS ........................................................... 17
6 INCREASING DEBT SERVICING BURDEN ......................................... 24
7 ONGOING WORKS AND CAPITAL EXPENDITURE .......................... 26
8 EXPENDITURE ON SALARY AND PENSION ..................................... 29
9 INCREASING RELIANCE ON WAYS AND MEANS ........................... 30
10 REVENUE DEFICIT ................................................................................ 32
11 FISCAL DEFICIT ..................................................................................... 34
12 EXPENDITURE ON EDUCATION & HEALTH .................................... 37
13 SUMMARY .............................................................................................. 39

2
 1 INTRODUCTION

After the bifurcation of the State, the first budget of Telangana was presented
in November 2014. When the state was formed, there was a feeling of euphoria
that the aspirations of four crore people of Telangana have become a reality. One
of the key themes of the Telangana movement was state finances apart from water
and employment. It was anticipated that the state would be governed in a fiscally
prudent and responsible manner. Further, to meet the aspirations of the people
who have been deprived of their due share in the united Andhra Pradesh, it was
expected that there would be a renewed focus on the economic development of the
state while taking care of the needs of the poor and underprivileged.

In spite of all the uncertainty and pendency of the division of assets of the
state and the corporations, Telangana started on a firm footing on the fiscal front.
There was a revenue surplus during the first 5 years. The fiscal responsibility norms
were also broadly adhered to.

The situation of the state started changing quite drastically once the off-
budget borrowings started being mobilized in the name of mega projects such as
Kaaleshwaram, Palamuru Rangareddy, Sitarama, and Mission Bhagiratha. Special
Purpose Vehicles (SPVs) were created to mobilize the necessary resources for
undertaking these mega capital-intensive projects. The Fiscal Responsibility and
Budget Management Act was amended in the year 2020 so that the quantum of
guarantees that could be given by the state government was enhanced consequently
from 90% of revenue receipts to 200%. Large scale mobilization of the off-budget
borrowings and lack of revenues to the SPVs meant that effectively the government
guaranteed loans were being serviced by the government itself from the budgetary
resources. This meant a rapid increase in the debt servicing by the state. Therefore,
the balance of fiscal space available for the welfare and development of the state of
Telangana came down year by year.
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 After 10 years of the previous government rule, a situation has come that the
debt burden including the off-budget borrowings of the state has become enormous.
This has created distress on the fiscal front. The present white paper is an attempt
to give a clear picture as to where the state finances stand as of December 2023.

The White Paper is organized as follows:

First, the quality of budget making exercise in terms of the Budgeted vs.
Actual is analyzed. The state has performed very poorly in terms of fiscal
marksmanship. Next, the paper presents the expenditure done in the Telangana
region of the united Andhra Pradesh from 1956 onwards. The assets that are
created due to these resources spent are also listed.

Then the paper traces the receipts side of Telangana's growth from state
formation onwards, in comparison to other states. After that the debt position of
the state is analyzed in detail. This includes the debt on the state’s books as well as
debt raised by the SPVs and other institutions based on the guarantees provided by
the government. As the debt has enormously increased, this has meant that the
debt service burden, i.e., the principal repayment and interest payments by the state
also has increased proportionately. The State also took up an ambitious
infrastructure creation program by incurring capital expenditure. The details of
such works taken up, the expenditure made so far, and commitments which are
made on these capital works are presented.

Expenditure on the employees and pensioners of all categories in terms of

their salary and pension is presented. Due to the huge mismatch between resource
availability and expenditure commitments, the state had to increasingly rely on the
Ways and Means facility provided by the RBI.

2
 The performance of the state under the revenue deficit and fiscal deficit
parameters and also in terms of expenditure on important sectors such as Education
and Health is presented. Finally, the white paper summarizes the state of state
finances in Telangana as of December 2023.

The paper aims to present in a simple and easily understandable language -

the financial position of the state, as inherited by the present government. The
objective is to foster public debate, informed by facts, so that the state finances are
managed in a fiscally responsible and prudent manner.

3
 2 BUDGETED VS ACTUAL EXPENDITURE OF
TELANGANA

The budget estimates of government expenditure are planned expenses for

the budgeted year prepared in the previous fiscal. The actual expenditure numbers
emerge from audited accounts, and as the name suggests, refer to the total amount
that the Government has actually spent in one financial year, i.e., from 1st April of
the current year to 31st March of the next year, toward achieving those goals. The
ratio of actual expenditure to budget estimates, which is a measure of budget
reliability, indicates the quality of the planning process and adherence to budgetary
discipline. Table 1 presents this measure of budget reliability as the percentage of
actual expenditures to budget estimates.

Table 1: Budget Estimates vs. Actual Expenditure

Sl. Year Budget Expenditure Actual Exp as

No. Estimates (Rs. crore) % of Budgeted
(Rs. crore) Exp
1 2 3 4 5
1 2014-15 1,00,638 62,306 61.9%
2 2015-16 1,15,689 97,811 84.5%
3 2016-17 1,30,416 1,21,735 93.3%
4 2017-18 1,49,646 1,20,211 80.3%
5 2018-19 1,74,454 1,35,328 77.6%
6 2019-20 1,46,492 1,42,857 97.5%
7 2020-21 1,82,914 1,57,547 86.1%
8 2021-22 2,30,726 1,82,998 79.3%
9 2022-23 (Prov.) 2,56,859 2,04,085 79.5%
Total 14,87,834 12,24,877 82.3%
10 2023-24 (BE) 2,90,396 1,48,0531 51.0%
Source: Finance Accounts, Comptroller and Auditor General of India

Since the formation of Telangana in FY 2014-15, the Budget estimates and

actual expenditure figures of the state saw an upward trend. Starting with ₹1,00,638
crore in FY 2014-15, the budget estimates grew to ₹2,56,859 crore in FY 2022-23.

1 Up to November 2023

4
The actual expenditure figures also witnessed an ascending pattern from ₹62,306
crore in FY 2014-15 to ₹2,04,085 crore in FY 2022-23.

The percentage share of actual expenditure in the overall budget estimates,

however, is worrisome. Actual expenditure as a percentage of Budget estimates was
at its lowest level (61.9%) in FY 2014-15. In the period between 2014-23, on
average, Telangana actually spent only 82.3% of the budgeted expenditure.

Table 2: General Category States: Total Expenditure Budget Estimates vs.

Actual Expenditure (2021-22) 2

Budget Actual Actual Exp as

Sl.
State Estimates Expenditure % of Budgeted
No.
(Rs. crore) (Rs. crore) Exp
1 2 3 4 5
1 Rajasthan 2,50,247 2,91,191 116.4%
2 Karnataka 2,31,642 2,61,932 113.1%
3 Madhya Pradesh 2,17,123 2,40,186 110.6%
4 Kerala 1,62,032 1,63,226 100.7%
5 Maharashtra 4,37,961 4,34,825 99.3%
6 Gujarat 2,23,333 2,14,113 95.9%
7 Tamil Nadu 3,29,035 3,14,419 95.6%
8 West Bengal 2,78,727 2,60,092 93.3%
9 Odisha 1,70,000 1,53,797 90.5%
10 Goa 21,644 19,530 90.2%
11 Chhattisgarh 1,05,213 94,683 90.0%
12 Bihar 2,18,303 1,93,123 88.5%
13 Haryana 1,27,484 1,10,437 86.6%
14 Jharkhand 91,277 77,865 85.3%
15 Andhra Pradesh 2,29,779 1,91,594 83.4%
16 Uttar Pradesh 5,50,271 4,39,963 80.0%
17 Telangana 2,30,726 1,82,998 79.3%
18 Punjab 1,68,015 1,25,501 74.7%

2 General states are the following 18 Indian states that account for approximately 92% of India’s population
and do not receive any special assistance from the Central government in the form of development assistance
-- Andhra Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Madhya
Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West
Bengal.

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Source: RBI State Finances Report, 2023-24.

In FY 2021-22 (Table 2), Telangana had one of the highest gaps between the
budgeted and actual expenditure among General States3. With the state spending
only 79.3% of its estimated budgeted expenditure in that year, its performance was
the second worst, with only Punjab having a lower proportion of actual expenditure
to budget estimates (at 74.7%) than Telangana.

As seen from Table 2, it is clear that the Budget did not correspond to reality.
On the one hand, receipts were inflated and on the other hand, expenditure was
boosted. Owing to the unrealistic estimation of receipts, the departments that
incurred expenditure were not able to make payments leading to a spill-over of their
commitments. To place the matter in perspective, the gap between Estimates and
Expenditure was about 20% over the years for the new Telangana state, whereas
the corresponding figures for other States in this time period was only about 5%. In
fact, for some States like Karnataka, Kerala, Madhya Pradesh, and Rajasthan, the
expenditure was more than the Budget Estimates. Therefore, the position of
Telangana vis-à-vis other States points towards a flawed and over-optimistic
budgetary process.

3General states are the following 18 Indian states that account for approximately 92% of India’s
population and do not receive any special assistance from the Central government in the form of
development assistance -- Andhra Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Jharkhand,
Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana,
Uttar Pradesh and West Bengal.

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 In comparing the undivided state of Andhra Pradesh, Table 3 illustrates that,
on average, the difference between budgeted and actual expenditure was only 13%.

Table 3: United Andhra Pradesh Budget vs Expenditure

(Rs.in crore)
Sl. Year Budget Actuals % of Expr.
No. Estimates
1 2 3 4 5
1 2004-05 51,142 45,747 89.5%
2 2005-06 55,331 48,628 87.9%
3 2006-07 63,528 56,502 88.9%
4 2007-08 80,997 74,672 92.2%
5 2008-09 1,00,437 80,467 80.1%
6 2009-10 1,03,485 85,108 82.2%
7 2010-11 1,13,660 1,00,854 88.7%
8 2011-12 1,28,542 1,15,882 90.2%
9 2012-13 1,45,855 1,29,441 88.7%
10 2013-14 1,61,349 1,36,629 84.7%
Total 10,04,326 8,73,929 87.0%
Source: Budget Documents of United Andhra Pradesh

It is imperative to note that at the Central Government level, as depicted in

Table 4, the average variance between budgeted and actual expenditure is below
3%.
Table 4: Government of India Budget vs Expenditure
(Rs.in crore)
Sl. Year Budget Expenditure % of Expr
No. Estimates
1 2 3 4 5
1 2014-15 17,94,892 16,63,673 92.7%
2 2015-16 17,77,477 17,90,783 100.7%
3 2016-17 19,78,060 19,75,194 99.9%
4 2017-18 21,46,735 21,41,973 99.8%
5 2018-19 24,42,213 23,15,113 94.8%
6 2019-20 27,86,349 26,86,330 96.4%
7 2020-21 30,42,230 35,09,836 115.4%
8 2021-22 34,83,236 37,93,800 108.9%
9 2022-23 (Prov.) 39,44,909 41,87,232 106.1%
Total 2,33,96,101 2,40,63,934 102.9%
Source: Expenditure up to FY 2021-22 as per Govt. of India Budget and FY 2022-23 as
per Monthly Accounts of CGA, GOI.

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 This inability of the Telangana government to attain the budgeted
expenditure can be attributed to a shortfall in collections compared to the budgeted
revenue receipts. Ambitious expenditure targets, set right at the budget preparation
stage, were never achieved. This data, therefore, highlights the need to rationalize
the budget forecasting mechanisms in the state, with an emphasis on creating
realistic budgeting practices that reduce the gap between budgeted expenditures and
actuals. These remarks were also made by the C&AG in all their audit reports
submitted to the State Legislature.

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3 RESOURCES SPENT IN THE TELANGANA REGION IN
UNITED ANDHRA PRADESH

The expenditure of the government comprises two key components –

Revenue Expenditure and Capital Expenditure.

Revenue expenditure refers to spending that does not directly lead to the
creation of physical or financial assets. This includes expenses on the day-to-day
operations of government departments, providing various services, interest
payments on government debt, and grants to various institutions.

Capital expenditure covers government investments in long-term assets, such

as land, buildings, machinery, and investment in shares. Additionally, it
encompasses loans and advances provided to PSUs and other entities, fostering
infrastructure development and economic growth.

In the period FY 1956-57 to FY 2013-14, before the bifurcation of Andhra

Pradesh, Telangana’s share in the combined state’s expenditure increased from ₹33
crores to ₹56,947 crores. This was a phenomenal increase over a period of 57 years,
wherein the total expenditure grew at an annual average rate of 14.9%. Notably,
the total revenue receipts in the state also grew by 14.9% in this period.

Table 5: Total Expenditure of United Andhra Pradesh from 1956-57 to 2013-14

and share of Telangana
(Rs.in crore)
Sl. Year Combined State Total Telangana share
No. Expenditure (41.68%)
1 2 3 4
1 1956-57 79 33
2 1957-58 129 54
3 1958-59 121 50
4 1959-60 164 68
5 1960-61 182 76
6 1961-62 195 81
7 1962-63 187 78

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Sl. Year Combined State Total Telangana share
No. Expenditure (41.68%)
8 1963-64 256 107
9 1964-65 248 103
10 1965-66 328 137
11 1966-67 487 203
12 1967-68 380 158
13 1968-69 392 164
14 1969-70 584 244
15 1970-71 615 256
16 1971-72 636 265
17 1972-73 720 300
18 1973-74 720 300
19 1974-75 599 250
20 1975-76 784 327
21 1976-77 903 376
22 1977-78 1,142 476
23 1978-79 1,304 544
24 1979-80 1,453 606
25 1980-81 1,610 671
26 1981-82 1,831 763
27 1982-83 1,933 806
28 1983-84 2,588 1,078
29 1984-85 3,119 1,300
30 1985-86 3,413 1,423
31 1986-87 4,068 1,696
32 1987-88 4,294 1,790
33 1988-89 5,223 2,177
34 1989-90 5,768 2,404
35 1990-91 6,581 2,743
36 1991-92 7,758 3,233
37 1992-93 8,983 3,744
38 1993-94 10,541 4,394
39 1994-95 12,459 5,193
40 1995-96 14,301 5,961
41 1996-97 16,265 6,779
42 1997-98 17,745 7,396
43 1998-99 21,957 9,152
44 1999-00 22,767 9,489
45 2000-01 28,119 11,720
46 2001-02 31,074 12,952
47 2002-03 34,373 14,326
48 2003-04 40,120 16,722
49 2004-05 47,153 19,653
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 Sl. Year Combined State Total Telangana share
No. Expenditure (41.68%)
50 2005-06 48,306 20,134
51 2006-07 56,648 23,611
52 2007-08 74,875 31,208
53 2008-09 80,804 33,679
54 2009-10 85,075 35,459
55 2010-11 1,00,636 41,945
56 2011-12 1,15,882 48,299
57 2012-13 1,29,441 53,951
58 2013-14 1,36,629 56,947
Total 11,94,945 4,98,053
Source: Budget Documents of United Andhra Pradesh

As seen from Table 5 above, in united Andhra Pradesh, expenditure incurred

in the Telangana region of the combined state in the period FY 1956-57 to FY 2013-
14 was ₹ 4,98,053 Crore.

Telangana saw the creation of crucial assets with this expenditure. Among
them are key infrastructure projects such as the Outer Ring Road and Rajiv Gandhi
International Airport. Additionally, essential irrigation projects like Nagarjuna
Sagar Dam, Jurala, Koilsagar, Devadula, Sriram Sagar, and Kadem were
undertaken. Notably, multiple drinking water initiatives for Hyderabad City from
Manjeera, Krishna, and Godavari rivers across different phases (Phase I, Phase II,
and Phase III) were successfully executed.

Additionally, universities and medical colleges across various districts, and

hospitals like NIMS, RIMS, Gandhi Hospital, MGM, and KMC were established
and operationalized. In addition, extensive infrastructure developments such as
roads, buildings, drains, and power lines were undertaken to support the growth of
the state.

Furthermore, the establishment of major defense organizations including

DRDO, NFC, Midhani, DRDL, and BDL, among others, contributed significantly
to solidifying Telangana's status as a notable defense hub in India. These defense
institutions also led to the establishment of numerous small and medium ancillary

11
units, contributing to the growth of the defense cluster in Hyderabad, which stands
as a prominent defense center in the country today.

During this era, a multitude of public sector undertakings including BHEL,

ECIL, CPRI, and IDPL, amongst others, were established. Notably, IDPL played
a pivotal role as a nucleus and catalyst for the pharmaceutical industry, contributing
to Hyderabad's emergence as a major hub for pharmaceutical and biotech
companies such as Reddy Labs, GSK, Mylan, Bharat Biotech, Hetero, and
Aurobindo, amongst others.

Simultaneously, Hyderabad also established itself as a significant research

center, hosting prestigious institutions like CCMB, HCU, IICT, NGRI, ICRISAT,
NARM, NIN, EFLU, and others. Furthermore, several Government of India
training institutions such as NPA, NISA, Hakimpet Air Force Training School,
NISIET, and more were set up.

Although these institutions were established by the Central government or

the private sector, it's noteworthy that the then State Governments played a crucial
role by providing land, other necessary facilities, and appropriate incentives,
contributing significantly to their establishment and growth.

All the aforementioned assets were developed with a focus on frugality and
fiscal prudence. In the period between 1956 and 2014, United Andhra Pradesh
witnessed sixteen Chief Ministers. At the time of Telangana's formation, the
outstanding debt stood at a modest ₹72,658 crores.

However, the current state of affairs reveals a significant escalation in debt.

Presently, the state's standalone debt has surged to ₹3,89,673 crores, and when
considering the debt of the special purpose vehicles (SPVs) serviced by the
Government, the actual debt rises to ₹5,16,881 crores. Furthermore, incorporating
contingent liabilities guaranteed by the government, the total debt skyrockets to
₹6,12,343 crores.

12
 Over the past decade, there is a discernible absence of visible and substantial
infrastructure development that corresponds proportionally with the accumulated
debt during this period. This divergence raises serious concerns regarding the
effective utilization of borrowed funds for infrastructure creation in the state.

13
 4 TRENDS IN REVENUE RECEIPTS

Revenue receipts can be defined as those receipts that neither create a liability
nor cause a reduction in the assets of the government. They are regular and
recurring in nature and the government receives them in the normal course of
activities. A state’s revenue receipts comprise four components, namely:

a. State's Own Tax Revenue

b. Share of Central taxes
c. Non-tax revenue and
d. Grants from the Central Government

Revenue receipts make up the major portion of government revenues and

are crucial for delivering the services of the state.

In FY 2014-15, the total revenue receipts in nominal terms stood at ₹ 51,042

crore. In the years post-state formation, revenue receipts showed an overall
increasing trend. The growth rate of overall revenues (Table 6), however, had a
declining trend in the period FY 2015-21. Further, the growth rate of revenue
receipts since state formation has been very volatile, dipping from 49.16% in FY
2015-16 to 8.78% in FY 2016-17, rising from 7.25% in FY 2017-18 to 14.18% in FY
2018-19, and spiking up from -1.59% in 2020-21 to 26.31% in 2021-22.

Table 6: Trend in Total Revenue Receipts

Sl. Year Total Revenue % YoY Total Revenue Receipts as a

No. Receipts Growth percentage of GSDP
1 2 3 4 5
1 2014-15 51,042 - 10.1%
2 2015-16 76,134 49.16% 13.2%
3 2016-17 82,818 8.78% 12.6%
4 2017-18 88,824 7.25% 11.8%
5 2018-19 1,01,420 14.18% 11.8%
6 2019-20 1,02,544 1.11% 10.8%

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 Sl. Year Total Revenue % YoY Total Revenue Receipts as a
No. Receipts Growth percentage of GSDP
1 2 3 4 5
7 2020-21 1,00,914 -1.59% 10.7%
8 2021-22 1,27,469 26.31% 11.3%
9 2022-23 (Prov.) 1,59,350 25.01% 12.1%
10 2023-24 (BE) 2,16,567 35.91% 15.3%
Source: Finance Accounts, Comptroller and Auditor General of India

As a proportion of GSDP, revenue receipts underwent a decline from the

peak of 13.2% in FY 2015-16 to 11.8% in FY 2018-19. Thus, as a percentage of
GSDP, revenue receipts started declining even before the start of the economic
slowdown and the pandemic.

Telangana’s performance in terms of the revenue receipts-to-GSDP ratio in

comparison with other General States was less than satisfactory in FY 2021-22
(Table 7). At 11.3%, its receipts-to-GSDP ratio was 3.3 percentage points lower
than the India General States average (14.6%). Only five other states had lower
revenue receipts-to-GSDP ratios than Telangana in FY 2021-22.

Table 7: General States - Revenue receipts-to-GSDP ratio (2021-22)

Sl. State Revenue GSDP Revenue Receipts-

No. Receipts (Rs. crore) to-GSDP ratio
(Rs. crore)
1 Bihar 1,58,797 6,50,302 24.4%
2 Odisha 1,53,059 6,70,881 22.8%
3 Chhattisgarh 79,652 4,06,416 19.6%
4 Jharkhand 69,722 358,863 19.4%
5 Uttar Pradesh 3,71,011 1,974,532 18.8%
6 Madhya Pradesh 1,85,876 1,136,137 16.4%
7 Goa 12,509 82,604 15.1%
8 Rajasthan 1,83,920 1,218,193 15.1%
9 Andhra Pradesh 1,50,552 1,133,837 13.3%
10 West Bengal 1,78,159 1,363,926 13.1%

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Sl. State Revenue GSDP Revenue Receipts-
No. Receipts (Rs. crore) to-GSDP ratio
(Rs. crore)
11 Punjab 78,168 6,14,227 12.7%
12 Kerala 1,16,640 9,32,470 12.5%
13 Telangana 1,27,469 1,128,907 11.3%
14 Maharashtra 3,33,312 3,108,022 10.7%
15 Tamil Nadu 2,07,492 2,071,286 10.0%
16 Karnataka 1,95,762 1,962,725 10.0%
17 Haryana 78,092 8,70,665 9.0%
18 Gujarat 1,66,830 1,937,066 8.6%
Source: RBI State Finances - A Study of Budgets of 2023-24

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 5 OUTSTANDING DEBT TRENDS

The term "public debt" or “state debt” refers to the outstanding financial
obligations of a state. The state debt is what the state government owes its creditors
on account of money borrowed at any time in the past, and not yet repaid, and
based on the security of the consolidated fund of the state. The debt-to-GSDP ratio
compares a state’s public debt to its annual economic output value and is indicative
of the state’s ability to repay its debt. Higher debt-to-GSDP ratios indicate a higher
risk of default.

Rising expenditures in Telangana, not matched by a proportionate increase

in revenues, have led to increasing fiscal deficits. These fiscal deficits needed to be
funded through borrowings, which in turn, has led to the state accumulating an
increasing amount of debt each year.

The state started with an outstanding debt of Rs. 72,658 crores in FY 2014-
15, which increased at an annual average rate of 24.5% between FY 2014-15 and
FY 2022-23, reaching an amount of Rs. 3,52,061 crores by FY 2022-23(RE).
Further, as per budget estimates for FY 2023-24, the debt is estimated to increase
to Rs. 3,89,673 crores.

The debt-to-GSDP ratio of the State was one of the lowest in the country in
FY 2015-16 at 15.7%. By FY 2023-24, the same ratio went up to 27.8%; it has
almost doubled in 8 years. The debt-to-GSDP ratio has had an overall increasing
trend over the years, averaging 21.5% over the FY 2014-22 period. Further, in FY
2020-21 and FY 2021-22, the state failed to contain the debt-to-GSDP ratio within
the 25% ceiling recommended under the Fiscal Responsibility and Budget
Management (FRBM) Act.

17
 Table 8: Outstanding Debt Trends (Within budget borrowings)

(Rs.in crore)
Sl. Year Outstanding Debt Outstanding Debt
No. as % of GSDP
1 2 3 4
1 2014-15 72,658 14.4
2 2015-16 90,523 15.7
3 2016-17 81,821 12.4
4 2017-18 1,60,296 21.4
5 2018-19 1,90,203 22.2
6 2019-20 2,25,418 23.7
7 2020-21 2,71,259 28.8
8 2021-22 3,14,853 27.9
9 2022-23 (R.E.) 3,52,061 26.8
10 2023-24 (B.E.) 3,89,673 27.8
Source: State Finances: A Study of Budget of 2023-24, RBI.
Note: 1) Outstanding Debt includes Public Debt, Small Savings, Provident Fund and Reserve Funds.
2) Outstanding Debt includes an amount of Rs.6,949.49 crore towards Loans in lieu of GST
Compensation Shortfall.

What is important to note is that the debt figures stated above do not include
the ‘off-budget borrowings’ of the government. Off budget borrowings include loans
availed by entities outside of the government system but guaranteed by the state.
Some of these loans have now become financial obligations on the Consolidated
Fund of the State since these entities lack the financial resources to service these
loans (see Tables 9 and 10 below). If Government Guaranteed loans raised by SPVs
but serviced by the Government are added, the debt-to-GSDP ratio would increase
to 36.9%.

Government Guaranteed Loans Raised by SPVs and Serviced by the

Government
● A total of 17 SPVs and institutions have raised an amount of ₹1,85,029 crores
through off-budget borrowings. As these institutions do not have sufficient
revenue to service the debt, the Government is supporting them to pay back
the principal and interest. As of today, the total outstanding debt in this
category is ₹1,27,208 crores. Even though, legally and technically, this debt

18
 is not on the books of the State, it should be included in the total debt burden
of the State, as it is being serviced by the State.

Government Guarantee Loans which are raised by SPVs and serviced by the
SPVs
● A total of 14 SPVs and institutions have raised an amount of ₹ 1,18,557
crores through off-budget borrowings which are guaranteed by the
Government. As these institutions have revenues to service the debt, they
can pay back the principal and interest. As of today, the total outstanding
debt in this category is ₹ 95,462 crores.

Non-Guaranteed Loans which are raised and serviced by SPVs/ Corporations /

Institutions
● There also exists a third category of loans taken by corporations that are not
guaranteed by the Government. These loans are also repaid by the
corporations themselves without any debt servicing burden on the
Government. The details of such loans are mentioned in Table 12. As of
today, the total outstanding debt in this category is Rs. 59,414 crores.

The total debt on the books of the State, guaranteed and serviced by the State,
guaranteed but not serviced by the State, and not guaranteed and serviced by the
institutions is ₹ 6,71,757 crores.

Table 9: Summary of Outstanding Debt

Sl. Item Outstanding debt
No. (in Rs. crore)
1 2 3
1 FRBM Loans (2023-24 B.E.) 3,89,673
2 Government Guaranteed loans raised by SPVs but are 1,27,208
serviced by Government
3 Government Guarantee loans which are raised by 95,462
SPVs and serviced by them
4 Non-Guaranteed Loans which are raised and serviced 59,414
by SPVs/ Corporations / Institutions
Total 6,71,757

19
 Table 10: Government Guaranteed loans raised by SPVs but serviced by
Government
(Rs.in crore)
Sl. Agency Loan Loan Outstanding
No. sanctioned disbursed Loans as on
including IDC 1.12.2023
1 2 3 4 5
Irrigation Department
1 Kaleshwaram Irrigation Project 97,449 79,287 74,590
Corporation Ltd
2 Telangana State Water Resources 19,643 15,284 14,060
Infrastructure Development Corp Ltd
Department Total 1,17,092 94,572 88,651
Panchayat Raj and Rural
Development
3 Telangana Drinking Water Supply 32,775 27,838 20,200
Corporation Limited
Department Total 32,775 27,838 20,200
Transport, Roads and Building
Department
4 TS Housing Corporation Ltd 9,036 9,005 6,470
5 TS Road Development Corporation 4,200 4,167 2,951
6 Telangana Housing Board 1,000 990 990
Department Total 14,236 14,162 10,411
Municipal Administration & Urban
Development
7 Hyderabad Metropolitan Water 5,164 5,164 2,352
Supply and Sewerage Board
8 Telangana Urban Finance & 2,050 2,050 1,619
Infrastructure Development Corp.
Ltd (TUFIDC)
9 Hyderabad Metro Rail Ltd 387 329 286
Department Total 7,601 7,543 4,256
Animal Husbandry & Fisheries
Department
10 Telangana Sheep & Goat 4,000 3,833 907
Development Coop Federation Ltd.,
Hyderabad
11 TS Fishermen Cooperative Societies 600 600 125
Federation Ltd
12 Telangana State Dairy Development 917 370 132
Cooperative Federation Ltd.
Department Total 5,517 4,803 1,164
Energy Department
13 Telangana Power Finance Co Ltd. 2,130 2,130 1,536
Department Total 2,130 2,130 1,536

20
 Sl. Agency Loan Loan Outstanding
No. sanctioned disbursed Loans as on
including IDC 1.12.2023
1 2 3 4 5
Agriculture & Cooperation
Department
14 TS Horticulture Dev Corporation Ltd 874 874 44
Department Total 874 874 44
Health, Medical & Family Welfare
Department
15 Telangana Super Specialty Hospital 3,535 816 777
Corporation Limited
Department Total 3,535 816 777
Industries & Commerce Department
16 Telangana State Industrial 769 751 1
Infrastructure Corporation
Department Total 769 751 1
Home Department
17 TS Police Housing Corporation 500 480 168
Department Total 500 480 168
Total 1,85,029 1,53,968 1,27,208
Source: Concerned Departments

Table 11: Government Guarantee loans which are raised by SPVs and serviced
by them
(Rs.in crore)
Sl. Agency Loan Loan Outstanding
No. sanctioned disbursed Loans as on
1.12.2023
1 2 3 4 5
Food & Civil Supplies
Department
1 Telangana State Civil Supplies 65,300 65,300 56,146
Corporation
Department Total 65,300 65,300 56,146
Energy Department
2 Telangana State Southern 23,449 19,969 17,977
Power Distribution Company
Limited
3 Telangana State Northern 14,534 14,531 12,544
Power Distribution Company
Ltd.
Department Total 37,982 34,500 30,520
Agriculture & Cooperation
Department

21
Sl. Agency Loan Loan Outstanding
No. sanctioned disbursed Loans as on
1.12.2023
1 2 3 4 5
4 TSMARKFED 7,242 6,565 4,857
5 Hyderabad Agricultural Co- 450 450 0
Operative Association Ltd
(HACA)
6 TS Seeds Dev Corporation 400 400 398
Department Total 8,092 7,415 5,256
Transport, Roads and Building
Department
7 Telangana State Road Transport 2,100 2,100 1,270
Corporation
Department Total 2,100 2,100 1,270
Municipal Administration &
Urban Development
8 GHMC 1,600 1,444 1,332
Department Total 1,600 1,444 1,332
Information Technology &
Communications
9 ITE&C 530 530 530
Department Total 530 530 530
Industries & Commerce
Department
10 Telangana State Industrial 1,000 276 276
Infrastructure Corporation
11 Telangana State Finance 58 58 12
Corporation
12 Telangana State Khadi and 16
Village Industries Board
Department Total 1,058 334 303
Animal Husbandry & Fisheries
Department
13 Telangana State Dairy 145 103 103
Development Cooperative
Federation Ltd.
Department Total 145 103 103
Health, Medical & Family
Welfare Department
14 Nizam's Institute of Medical 1,750
Sciences, Hyderabad
Department Total 1,750
Total: 1,18,557 1,11,727 95,462
Source: Concerned Departments

22
 Table 12: Non-Guaranteed Loans which are raised and serviced by SPVs/
Corporations / Institutions
(Rs.in crore)
Sl. Agency Loan Loan Outstanding
No. sanctioned disbursed Loans as on
1.12.2023
1 2 3 4 5
Energy Department
1 Telangana State Power Generation 43,263 41,380 31,875
Co Ltd.
2 TRANSCO 16,351 13,217 10,027
3 Telangana State Southern Power 11,332 9,882 5,897
Distribution Company Limited
4 Singareni Collieries Co Ltd 6,655 5,908 2,596
5 Telangana State Northern Power 4,927 4,527 3,043
Distribution Company Ltd.
Department Total 82,529 74,914 53,437
Municipal Administration & Urban
Development
6 GHMC 4,930 4,930 4,906
Department Total 4,930 4,930 4,906
Transport, Roads and Building
Department
7 Telangana State Road Transport 1,825 1,184 1,000
Corporation
8 Telangana Housing Board 175 175 9
Department Total 2,000 1,359 1,009
Agriculture & Cooperation
Department
9 Telangana State Co Operative 81 69 30
Housing Societies Federation Ltd
Department Total 81 69 30
Industries & Commerce Department
10 Telangana State Trade Promotion 25 25 25
Corporation Ltd
Department Total 25 25 25
Youth Advancement, Tourism and
Culture Department
11 Telangana State Tourism 11 9 8
Development Co Ltd
Department Total 11 9 8
Total: 89,575 81,306 59,414
Source: Concerned Departments

23
 6 INCREASING DEBT SERVICING BURDEN

Debt servicing burden refers to the expenditure required to pay the interest
and principal on the loans taken from various sources over the years and is a major
component of the committed expenditure of the state.

The total debt servicing burden of Telangana has increased significantly over
the last nine years. For the ‘within budget’ component, the combined principal and
interest burden amounted to ₹ 6,954 crores in FY 2014-15. Thereafter, there was
double digit growth in these payments in all years except FY 2020-21. Growing at
an annual average rate of 22%, the total debt servicing burden of the state (within
budget) reached ₹32,939 crores in FY 2023-24.
Table 13: Year-wise Principal & Interest Repayments

(In Rs. crore)

Year Within Budget Outside Budget Grand Outside % of
Total Budget Total
Principal Interest Total % Principal Interest Total %
as % of Revenue
Change Change
Grand Receipts
Total
1 2 3 4 5 6 7 8 9 10 11 12
FY15 1,727 5,227 6,954 144 156 300 7,255 4% 14%
FY16 2,733 7,558 10,290 48% 268 383 650 117% 10,941 6% 14%
FY17 3,480 8,609 12,089 17% 266 965 1,231 89% 13,321 9% 16%
FY18 4,549 10,836 15,385 27% 383 2,197 2,579 110% 17,964 14% 20%
FY19 6,892 12,586 19,479 27% 1,108 3,583 4,692 82% 24,170 19% 24%
FY20 8,492 14,386 22,878 17% 2,257 5,109 7,366 57% 30,244 24% 29%
FY21 7,537 16,841 24,378 7% 2,442 6,691 9,133 24% 33,511 27% 33%
FY22 8,842 19,161 28,004 15% 4,887 9,909 14,796 62% 42,800 35% 34%
FY23 11,987 20,952 32,939 18% 9,071 11,968 21,039 42% 53,978 39% 34%
Total 56,241 116,156 172,396 20,826 40,961 61,787 2,34,183
Source: Budget Documents.

24
 In comparison, the debt-servicing burden on account of off-budget
borrowings grew at a much higher rate (Annual Average Growth Rate of 73%).
Due to this, their contribution to the total debt-servicing burden increased
substantially from 4% in FY 2014-15 to 39% in FY 2022-23.

The total debt servicing burden as a percentage of the total revenue receipts
has also increased significantly from 14% in FY 2014-15 to 34% in FY 2023-24,
which indicates that an increasingly larger portion of revenues is being used to
service debt, leaving less for other essential expenditures.

Another point of concern is that the top five corporations/entities, which

account for 95% of the outstanding government guarantees, availed loans from
various financial institutions at average interest rates in the range of 8.93% -
10.49%. This is much higher when compared with the average interest rate of 7.63%
for Open Market Borrowings (OMB). As these corporations do not have a
significant revenue source of their own, the government is effectively bearing the
higher interest burden, further constraining the financial situation.

Table 14: Outstanding loan and average interest rate of select entities

Sl. Entity Outstanding Loan Average

No. as of 01.12.2023 interest rate
(in Rs. crore)
1 2 3 4
1 Kaleshwaram Irrigation Project Corporation 74,590 9.69%
Ltd
2 Telangana Drinking Water Supply 20,200 9.48%
Corporation Limited
3 Telangana State Water Resources 14,060 10.49%
Infrastructure Development Corp. Ltd
4 Telangana State Housing Corporation 6,470 8.98%
5 Telangana State Road Development 2,951 8.93%
Corporation
Source: Concerned Departments

25
 7 ONGOING WORKS AND CAPITAL EXPENDITURE

Since formation of the State of Telangana, the Government has entered into
39,175 work agreements of 24 departments amounting to ₹ 3,49,843 crore, for
which ₹ 1,89,903 crores expenditure is already incurred by 4.12.2023 and a balance
amount of ₹ 1,59,940 crores is yet to be spent. The financial progress of the said
works at a glance is as follows:

Table 15: Status of Financial Progress of Ongoing Works in various

departments as of 4.12.2023
(Rs.in crore)
Sl. Department No. of Technical Expenditure Balance
No. Agreements sanction
amount
1 2 3 4 5 6 (4-5)
1 Irrigation 7,827 2,32,847 1,35,285 97,562
Department
2 Panchayat Raj and 18,477 72,817 36,610 36,208
Rural Development
3 Transport, Roads and 6,127 22,121 10,288 11,833
Building Department
4 Health, Medical & 403 9,892 971 8,921
Family Welfare
Department
5 Municipal 1,002 6,714 4,061 2,653
Administration &
Urban Development
6 Home Department 1,329 1,913 1,150 763
7 Tribal Welfare 997 1,295 640 655
Department
8 Agriculture & 336 574 160 414
Cooperation
Department
9 Scheduled Castes 669 420 237 183
Development
Department
10 Law Department 605 339 119 220
11 Higher Education 221 217 67 150
Department
12 Backward Class 111 201 90 112
Welfare Department

26
Sl. Department No. of Technical Expenditure Balance
No. Agreements sanction
amount
1 2 3 4 5 6 (4-5)
13 Secondary 170 107 55 52
Education,
Secretariat
Department
14 Youth Advancement, 80 84 34 51
Tourism and Culture
Department
15 Revenue Department 158 74 41 33
16 General 163 63 40 23
Administration
Department
17 Animal Husbandry & 164 53 18 35
Fisheries Department
18 Environment, Forest, 22 41 8 33
Science &
Technology
Department
19 Labour and 21 39 24 16
Employment
Department
20 Planning Department 2 13 3 11
21 Women, Children, 134 8 2 6
Disabled & Senior
Citizens
22 Legislature 144 5 1 4
23 Minorities Welfare 12 3 0 3
Department
24 Food & Civil Supplies 1 0 0 0
Department
Grand Total: 39,175 3,49,843 1,89,903 1,59,940
Source: Director of Works Accounts.

27
 Table 16: Abstract of payment status

(Rs.in crore)
Sl. Funding Technical Expenditure Balance
No. sanction amount
1 2 3 4 5 (3-4)
1 Budget 1,89,777 1,02,820 86,957
2 Borrowed Funds 1,60,066 87,083 72,983
Grand Total: 3,49,843 1,89,903 1,59,940
Source: Director of Works Accounts.

The State Government has to make budgetary provision of ₹ 86,957 crore in

the coming financial years for the balance works. Further, an amount of ₹ 72,983
crore will have to be borrowed from the various financial institutions. Overall, this
will add to the debt servicing burden of the State.

Table 17: Other Pending bills as of 19.12.2023

(Rs.in crore)
Sl. HOD Number of Amount
No. Pending Bills pending
1 2 3 4
1 DTA (Director Treasury and 3,32,670 4,908
Accounts)
2 PD (Public Deposit Account) 1,04,248 9,062
3 PAO (Pay and Accounts Office) 31,081 15,686
4 Director of Works Accounts - Works 10,169 10,498
Total: 4,78,168 40,154
Source: IFMIS Portal, Government of Telangana

The State Government as of 19.12.2023 will have to clear 4,78,168 bills

amounting to ₹ 40,154 crores payable to the employees/ contractors/ suppliers and
others.

28
 8 EXPENDITURE ON SALARY AND PENSION

Apart from interest payments, expenditure on salaries, wages, and pensions

contribute significantly to the total revenue expenditure. The total expenditure on
salaries increased in all the years since FY 2014-15 at an annual average growth
rate of 17%. There were significant spikes in FY 2015-16 (69%) and FY 2021-22
(23%), due to the implementation of revised pay scales.

Table 18: Expenditure on Salary and Pension

(in Rs. crore)

Year Regular Grants-in- Contract / Total % Pension Total % of
employees Aid Outsourcing Salary Change Revenue
employees & other Receipts
categories
1 2 3 4 5 6 7 8 9
(2+3+4)
FY15 10,805 1,333 782 12,920 4,210 17,130 34%
FY16 18,319 2,053 1,424 21,796 69% 8,217 30,013 39%
FY17 19,476 2,424 1,651 23,551 8% 9,011 32,562 39%
FY18 20,966 2,833 2,178 25,977 10% 11,932 37,909 43%
FY19 21,272 2,913 2,548 26,733 3% 11,477 38,210 38%
FY20 21,450 3,118 2,745 27,313 2% 11,834 39,147 38%
FY21 21,790 3,322 3,108 28,220 3% 13,599 41,819 41%
FY22 27,102 3,774 3,909 34,785 23% 14,024 48,809 38%
FY23 31,791 4,172 4,146 40,109 15% 15,816 55,925 35%
(Prov.)
Source: CAG Accounts.

Overall, the expenditure on salaries and pensions has almost tripled from Rs.
17,130 crores in FY 2014-15 to ₹ 48,809 crore in FY 2021-22. As of FY 2021-22,
these components account for 38% of the total revenue receipts, which is only
expected to increase with the upcoming pay revision commission’s
recommendations, filling of vacancies, and payment of dearness allowance arrears.

29
 9 INCREASING RELIANCE ON WAYS AND MEANS

The Reserve Bank of India (RBI) functions as a banker to the State

Governments and in this regard, provides Ways & Means Advances (WMA) and
Overdraft facilities for cash management. WMA are essentially short-term loans
provided by the RBI to bridge temporary gaps between a state's expenditure and
revenue receipts. These are provided as a bridge loan to cover expenses until tax
collections or other revenue streams arrive. Overdrafts are similar, but they are used
when the gap is bigger and WMA is not enough. Overdrafts have higher interest
rates than WMA.

Table 19: Year-wise Utilization of Ways & Means Advances

Description 2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021- 2022- 2023-24
15 16 17 18 19 20 21 22 23 up to
Nov-23
1 2 3 4 5 6 7 8 9 10 11
Treasury Bill 303 364 304 245 250 204 122 57 37 30
holdings -positive
cash balances
Special Drawing - 2 27 43 24 114 43 39 36 21
Limits (SDL) -
negative cash
balance
Normal Ways & - - 34 72 70 36 97 164 171 116
Means Advance -
negative cash
balance
Overdraft availed - - - - 5 21 12 103 105 121 77
beyond normal
and ways and
means
Total No. of days - 2 61 120 115 162 243 308 328 214
WMA & OD
utilised
Total No. of 303 366 365 365 365 366 365 365 365 244
calendar Days
Source: Reserve Bank of India

30
 The rapid deterioration in the finances of the state is visible in the increasing
reliance on WMA and Overdraft facilities over the years. The number of days in a
year with a positive cash balance declined from 303 days in FY 2014-15 to just 30
days in FY 2023-24 (up to November 2023), which is the lowest-ever figure. WMA
and Overdraft facilities were utilized for the highest number of days in FY 2022-23
(328), reflecting the grim state of the finances of the state government.

Availing the ‘WMA Special Drawing Limit’ facility attracts an interest rate
of ‘repo rate minus 2 percent’. The same for Normal WMA is the repo rate and for
Overdraft is the ‘repo rate plus 2 percent / 5 percent’ depending on the extent of
utilization. The trend over the years shows a drastic increase in the utilization of
the Overdraft facility from 5 days in FY 2017-18 to 121 days in FY 2022-23 and
Normal WMA from 34 days in FY 2016-17 to 171 days in FY 2022-23. As these
two facilities attract a much higher interest rate than the interest rate under ‘Special
Drawing Limits WMA’, the overall interest burden on the state has increased
significantly.

31
 10 REVENUE DEFICIT

Revenue deficit refers to the difference between the expenses incurred by the
Government on meeting its regular, recurring expenses such as payment of salaries,
pensions, interest, subsidies, grants to institutions, etc., and its income from taxes,
non-taxes, share in central taxes, and central government grants

When a revenue-deficit situation arises, the government has to borrow to

meet its expenses. Such borrowing is considered regressive as it is used for
consumption, and not for the creation of assets.

Table 20: Revenue Surplus and Deficit Trends

Sl. Year Revenue Surplus Revenue Surplus / Deficit

No. (in ₹ crore) as % of GSDP
1 2 3 4
1 2014-15 369 0.1%
2 2015-16 238 0.0%
3 2016-17 1,386 0.2%
4 2017-18 3,459 0.5%
5 2018-19 4,337 0.5%
6 2019-20 -6,254 -0.7%
7 2020-21 -22,298 -2.3%
8 2021-22 -9,335 -0.8%
9 2022-23 (Prov.) 6,508 0.5%
10 2023-24 (B.E.) 4,882 0.3%
Source: Finance Accounts, Comptroller and Auditor General of India

While the state registered revenue surpluses in the period 2014-19, in

2019-22, its revenue receipts were not sufficient to meet even its recurring expenses
such as payments towards salaries, pensions, interests, subsidies, etc.

32
 Further, it is pertinent to note that the State Finance Audit Reports (SFAR)
of the Comptroller and Auditor General of India (CAG)4 commented that on
account of irregular accounting, the state understated its revenue deficits in the
years 2015-21. This was reported to have been done through the adoption of
irregular accounting practices including misclassification of grants-in-aid, crediting
of loans obtained to revenue receipts, non/short-contribution to statutory funds,
non-discharge of interest liabilities, and classification of subsidies as loans.

4Report of the Comptroller and Auditor General of India – State Finances Audit Reports for the years
ended March 2016, March 2017, March 2018, March 2019, March 2020, and March 2021

33
 11 FISCAL DEFICIT

The difference between the total expenditure and the total receipts (excluding
borrowings) of the government is termed as Fiscal Deficit (FD). It is an indicator
of the total borrowings needed by the government.

Table 21: Fiscal Deficit Trends

Sl. Year Fiscal Deficit Growth Rate Fiscal Deficit FRBM Norm
No. (in ₹ crore) of Fiscal as % of as % of
Deficit GSDP GSDP
1 2 3 4 5 6
1 2014-15 9,410 1.9% 3.0%
2 2015-16 18,856 100.4% 3.3% 3.5%
3 2016-17 35,281 87.1% 5.4% 3.5%
4 2017-18 26,700 -24.3% 3.6% 3.5%
5 2018-19 26,949 0.9% 3.1% 3.5%
6 2019-20 31,759 17.8% 3.3% 3.4%
7 2020-21 49,038 54.4% 5.1% 5.04%
8 2021-22 46,639 -4.9% 4.1% 4.42%
9 2022-23 (Prov.) 32,119 -31.1% 2.4% 3.0%
10 2023-24 (B.E.) 38,235 19.0% 2.7% 3.0%
Source: Finance Accounts, Comptroller and Auditor General of India

The state’s receipts fell short of its expenditure by ₹ 9,410 crores in FY 2014-
15. This deficit doubled to ₹ 18,856 crore in FY 2015-16, and close to doubled again
in FY 2016-17, reaching a value of ₹ 35,281 crore. Between FY 2014-15 and FY
2021-22, the fiscal deficit of the state grew at an average annual rate of 33.1%. On
account of this, in FY 2021-22, the shortfall in the state’s revenues in comparison
with its expenditure was nearly 5 times the shortfall in FY 2014-15.

34
 Further, the State Finance Audit Reports (SFAR) of the Comptroller and
Auditor General of India (CAG) suggest that on account of accounting
irregularities, the state understated its fiscal deficits by ₹ 7,636 crore in the years FY
2015-21.

The state’s fiscal deficit as a percentage of the GSDP averaged 3.7% in the
period FY 2014-22 and did not meet the Fiscal Responsibility and Budget
Management (FRBM) norms for three out of the eight years.

In FY 2021-22, in terms of the FD-to-GSDP ratio, Telangana’s performance

in comparison with other General category states was very poor. With an FD-to-
GSDP ratio of 4.1%, it was one of the worst performing states, with only Punjab
(4.5%) and Kerala (4.9%) registering higher FD-to-GSDP ratios than Telangana in
that year. Table 21 shows this situation.

Table 22: General Category States: Fiscal Deficit-to-GSDP Ratio

Sl. State Fiscal Deficit-to-GSDP

No. ratio (2021-22)
1 2 3
1 Odisha -3.1%
2 Jharkhand 0.7%
3 Gujarat 1.2%
4 Chhattisgarh 1.5%
5 Uttar Pradesh 2.0%
6 Maharashtra 2.1%
7 Andhra Pradesh 2.2%
8 Goa 3.2%
9 Karnataka 3.3%
10 Madhya Pradesh 3.3%
11 Haryana 3.6%
12 West Bengal 3.7%
13 Bihar 3.9%
14 Rajasthan 4.0%
35
 Sl. State Fiscal Deficit-to-GSDP
No. ratio (2021-22)
1 2 3
15 Tamil Nadu 4.0%
16 Telangana 4.1%
17 Punjab 4.5%
18 Kerala 4.9%
Source: RBI State Finances – A Study of Budgets of 2023-24
Notes: 1. Gross Fiscal Deficit (GFD) receipts include revenue receipts and miscellaneous capital
receipts.
2. GFD Expenditure includes revenue expenditure, capital outlay, and loans and advances net of
recoveries.

36
 12 EXPENDITURE ON EDUCATION & HEALTH

Education Sector

Education is one of the most powerful instruments for reducing poverty and
inequality, and it sets the foundation for sustained economic growth. Investments
in the education sector are essential for ensuring that individuals are equipped with
the knowledge, skills, and critical thinking abilities required for a productive
workforce, and for creating a more equitable economy.

The National Education Policy 2020 (NEP 2020) envisions a substantial

increase in public investment in education by both the Central government and all
state governments to reach 6% of GDP. It states that this is extremely critical for
achieving the high-quality and equitable public education system that is truly
needed for India’s future economic, social, cultural, intellectual, and technological
progress and growth. As per the State of State Finances report published by PRS
(October 2023), while states are estimated to spend on average 14.7% of their
budget on education in FY 2023-24, Telangana is expected to spend 7.6%, which
is the lowest in the country and almost half the national average.
Figure 1: Expenditure on Education – 2023-24
30.0%

25.0%
24.3%

20.0%
19.5%
19.4%
18.9%
17.9%

15.0%
16.8%
16.6%
16.6%
16.5%
16.4%
16.1%
16.1%
14.9%
14.8%
14.7%
14.7%
14.5%
14.3%
14.1%
14.0%
14.0%
13.2%
13.1%
13.1%
12.6%

10.0%
12.3%
11.5%
11.5%
11.0%
9.9%
7.6%

5.0%

0.0%
JH

AP
MP

JK

GJ
DL
RJ

GA

KL

MN
UP
BR
AS

UK

NL

MZ

KA
AR
TS
MH

MG
WB

HR

TR
CG
HP

SK

OD
PB

PY
TN

Source: State of State Finances, October 2023, PRS

37
Health Sector

“Healthcare expenditure can result in better provision of health

opportunities, which can strengthen human capital and improve productivity,
thereby contributing to economic performance.” Resources are required to expand
hospitals, upgrade existing facilities with modern equipment, attract and retain
skilled healthcare personnel, and focus on overall healthcare accessibility and
affordability. The latter is more important due to the high out-of-pocket expenditure
incurred on healthcare, which affects the poor the most. It is therefore important to
assess the phenomenon of healthcare spending in a country.

Figure 2: Expenditure on Health – 2023-24

16.0%

14.0%
14.3%

12.0%

10.0%
9.8%
9.2%

8.0%
8.6%
7.6%
7.6%
7.4%
7.3%

6.0%
7.0%
6.7%
6.7%
6.7%
6.5%
6.5%
6.3%
6.3%
6.2%
6.1%
6.0%
5.9%
5.9%
5.8%
5.7%
5.6%
5.6%
5.3%
4.0% 5.2%
5.0%
4.9%
4.6%
4.2%
2.0%

0.0%
BR

AR
JH

AP
JK

MP

GJ
DL

GA

RJ

MN

SK
UP

KL
UK

MZ
NL

AS

TS
KA
MG

WB

TR

HR

MH
OD

CG
HP

PB
PY

TN

Source: State of State Finances, October 2023, PRC

As per the State of State Finances report published by PRS (October 2023),
Telangana is estimated to spend only 5% of the overall budgeted expenditure in FY
2023-24 on Health & Family Welfare, which is fourth lowest in the country and
below the national average (6.2%) by 1.2 percentage points.

38
 13 SUMMARY

The principal tool in the hands of the state government to manage the finance
is the state budget. In Telangana, there is a gap of almost 20% between the
budgeted and the actual expenditure. This figure is not only high when compared
to other states, but also in comparison to the expenditure achieved in the united
Andhra Pradesh. This gap in expenditure between the budget and actuals has
meant that there is an accumulation of committed expenditure in terms of payments
made for the services rendered by the suppliers and contractors and also to the
employees. Further, there is a huge gap between the budgeted and actual money
spent on major welfare schemes such as Dalita Bandhu and other welfare programs
aimed at the welfare of ST, BC and minorities.

In united Andhra Pradesh, over a period of 57 years, an amount of ₹4.98

lakh crore was spent for development of Telangana region. With this money,
substantial and tangible assets in terms of roads, irrigation projects, educational
institutions, hospitals and power projects were created. In addition, the state
facilitated - by giving lands and incentives to central public sector undertakings,
defense establishments, thus paving the way for Hyderabad to be a pharma, defense
and IT major in India. In contrast, after the formation of the state, in the last 10
years, the total debt of the state and the SPVs has gone up to ₹ 6,71,757 crore from
₹ 72,658 crore in 2014-15. This gigantic increase in the debt (almost 10 times) has
created an enormous fiscal stress on the state’s finances in terms of its ability to
service the debt. Further, no tangible fiscal assets in proportion to the money spent
were created in the past 10 years.

The debt servicing burden of monies which are borrowed on the budget and
off-budget has increased enormously and is consuming 34% of the state’s revenue
receipts. Further, the salaries and pensions of employees consume another 35% of
the state revenue receipts. This committed expenditure has meant that very little
fiscal space is available for undertaking any welfare measures for the poorer sections
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of the society and growth enhancement measures for the development of the
economy.

Due to the increased fiscal stress, the state has to depend upon the ways and
means advances from the RBI on a daily basis. From a situation where the state
had positive balances for all the 100% of the days in 2014 to a situation where the
state has positive balances in less than 10% of the days - shows the enormous fiscal
stress. Consequently, the state has not been able to spend enough money on critical
sectors such as Education and Health where the budgeted amount as the proportion
of the total expenditure is amongst the lowest in the country.

A careful analysis of the above facts shows that Telangana state which was
a revenue surplus state in 2014 and has one of the fastest growing economies in the
country is now staring at a debt crisis. The rate of accumulation of the debt from
off-budget borrowings has led to this situation. Every effort will be made to increase
the state's resources and direct expenditures toward uplifting the impoverished,
while reducing unnecessary spending. The new Government is determined to
implement all the six guarantees which are promised by the party based on which
the people of Telangana had given the mandate for change. The Government is
determined to overcome the fiscal challenges in a responsible, prudent and
transparent manner. The white paper on state finances is the first step in this
direction.

BHATTI VIKRAMARKA MALLU

DEPUTY CHIEF MINISTER
(FINANCE, PLANNING AND ENERGY)

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