Home NewsEconomy Financial mismanagement places Andhra Pradesh among the top borrowers in the country

Financial mismanagement places Andhra Pradesh among the top borrowers in the country

by Staff
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In the current financial year, 28 states and 2 union territories of the country have raised a total of Rs. 7.78 lakh crore through market borrowings, according to a report by rating agency CARE Ratings. Market borrowings of all states and Union Territories are 28% higher than the previous FY 2019-20, amounting to Rs. 6.07 crore.

According to the report, states have resorted to higher borrowings in FY 2020-21 due to the shortfall in revenue during the lockdown period as well as the disruption of economic activity. Adding to the loss of revenue, expenditures for control and mitigation against the pandemic rose significantly. Most states in the country have experienced higher market borrowings compared to the preceding year. However, some states have borrowed far more in comparison. Borrowings of Andhra Pradesh, for instance, were 22% higher year-on-year, while states such as Odisha borrowed 60% less than the previous year.

Andhra Pradesh has one of the highest borrowings in this fiscal year with more than Rs. 51,000 crore borrowed through the market until March 23rd, 96% of the expected borrowing for the year. In comparison, the borrowing in the corresponding period last year was Rs. 41,895 crore. Only states such as Karnataka, Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal had higher borrowings than Andhra Pradesh. However, major states such as Maharashtra despite the sizeable borrowings have only raised 61% of the quantum of the indicative borrowings.

As per the latest CAG report, Andhra Pradesh’s total borrowings in the current FY 2020-21 had reached Rs. 73,912 crore until January 2021, highest by a margin than other southern states. The state government has allocated meagerly towards capital expenditure in contrast to the central government’s advice. To ensure future growth and employment opportunities, the expenditure towards capital asset building is also vital. State governments are required to find a balance between welfare expenditure and capital asset creation. Proportion of capital expenditure in total state government expenses since April 2020 is a mere 11%. The rest was allocated to revenue and consumption expenses.

Experts have expressed caution regarding the current financial mismanagement and looming debt trap in Andhra Pradesh’s economy.

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