Former Union Minister and Rajya Sabha member Suresh Prabhu wrote to Finance Minster Nirmala Sitharaman stating the alarming economic situation in Andhra Pradesh. The state government is indebted beyond the scope of fiscal responsibility. The letter also stressed that funds from state owned corporations were being diverted to welfare schemes.
The Andhra Pradesh government’s borrowings as of October 2020 were more than 125% of budget estimates. By October, the state government had borrowed Rs. 60,811 crore from different sources as against Rs. 48,296 crore estimated for the entire fiscal year. Revenue receipts were a mere 35% of the total budget estimate at Rs. 56,799 crore compared to a target of Rs. 1,61,959 crore for the year. The revenue deficit reached a staggering 262% of the budget estimate. This raises serious concerns about fiscal mismanagement by the government.
The letter to the finance minister raised concerns regarding the funding of welfare schemes. The 2020-21 budget reduced allocation for economic services by 11% as compared to the previous fiscal. Allocation for rural development was also cut by half, to a mere 7% of the total budget. Meanwhile, proportion of expenditure on social services increased to 43% of the budget. Out of this, more than 18% was earmarked for welfare expenditure.
With more freebie schemes introduced this year, revenue expenditure shot up to Rs. 1,05,122 crore until October 2020, which is 58% of the total budget. In comparison, revenue expenditure was Rs. 72,187crore in the same period last year, amounting to only 40% of the entire budget.
While existing borrowings are mounting, the State Assembly passed the FRBM (Amendment) Bill on 2nd December allowing for an additional borrowing of 2% of the Gross State Domestic Product (GSDP), over the existing 3% limit. The former Union Minister has urged the Finance Minister to implement strict measures to ensure fiscal prudence. Additionally, the finance minister must look into the diversion of public funds for purely electoral gains.