Andhra Pradesh's Financial Dilemma: A Deep Dive into Rising Debt and Fiscal Deficit

The Andhra Pradesh government faced financial strain in 2024-25, incurring a fiscal deficit beyond the FRBM target, driven by heavy borrowing and increased interest payments. Despite utilizing funds via RBI mechanisms, the state's debt escalated, impacting capital expenditure and fiscal sustainability, as highlighted by a CAG report.

The Andhra Pradesh government navigated a challenging financial landscape in the fiscal year 2024-25, highlighted by borrowing Rs 1.72 lakh crore through various financial mechanisms, according to a report from the Comptroller and Auditor General (CAG). This borrowing resulted in an interest payout of Rs 303 crore.

The report, tabled in the Assembly, underscored the government's struggle to meet the fiscal targets. With a revenue deficit surpassing the Fiscal Responsibility and Budget Management (FRBM) benchmark of 2.7% of GSDP, reaching 3.75%, Andhra Pradesh was compelled to borrow for operational expenses, increasing its interest burden significantly. The fiscal deficit stood at 5.05%, over the mandated 4% ceiling, further straining resources and impinging on capital expenditure.

The state availed substantial facilities such as Special Drawing Facility, Ways and Means Advances, and Overdraft from RBI, exacerbating the debt situation. Opposition voices, including TDP spokesperson Neelayapalem Vijay Kumar, point to previous government mismanagement as a factor in the financial woes, calling for greater accountability and strategic use of borrowed funds for capital asset financing to ensure future fiscal sustainability.

(With inputs from agencies.)