How Chandrababu’s Andhra Budget is a balancing act between sops and fiscal prudence

The Chandrababu Naidu-led National Democratic Alliance (NDA) government in Andhra Pradesh, which assumed office in the second quarter of 2024-25, has presented a budget of Rs 2.94 lakh crore, highlighting the extraordinary emphasis on welfare schemes and sops has been reduced by the previous Yuvajana. YS Jagan Mohan Reddy’s Sramika Rythu Congress Party (YSRCP) regime.

Naidu postponed the presentation of the budget to first study the fiscal status of the state, and earlier took the ordinance route to get approval for the ballot on account for the expenditure incurred till November. His government targeted the previous YSRCP regime for “destroying the financial conditions of the state” by halting key infrastructure and development projects, including the green field capital of Amaravati.

Reducing the huge financial burden on Jagan Reddy’s populist measures proved daunting. But Finance Minister Payyavula Keshav decided to make the paradigm shift and develop infrastructure even at the cost of budget silence on several election promises that contributed to the landslide election victory of the Telugu Desam Party (TDP). “After five years of abandonment, the Amaravati project is now taking shape as a global hub for infrastructure, investment and jobs,” Keshav said.

As expected, the financial assistance from external agencies for Amaravati will be a loan, but the state could keep it outside the FRBM (fiscal responsibility and budgetary management) boundaries as it is routed through the Union government. But this has forced the government to delay the implementation of some election promises. The budget does not allocate money for the unemployment benefit promised to the unemployed, the promise to provide Rs 1,500 per month to women between the ages of 19 and 59 and for free bus travel for women.

The ruling Dravida Munnetra Kazhagam (DMK) in Tamil Nadu and the Congress in Telangana have kept their promise of the free bus travel scheme, which is now popular among women in both the neighboring states.

However, the Naidu government has provided Rs 6,500 crore for Talliki Deevena, an election promise of doling out Rs 15,000 per year for every school-going child. To fund all 8.8 million of these children, the government would have had to allocate Rs 13,500 crore.

The government hopes to roll out the other promises, called the ‘Super Six guarantees’, in phases.

On the revenue side, it is not surprising that the state hopes to rake in as much as Rs 25,597 crore from excise duties, including liquor sales. The government has forecast an increase in excise revenues of nearly Rs 10,000 crore. Liquor industry analysts who study consumption trends have pointed out that just five states — Tamil Nadu, Kerala, Karnataka, Andhra Pradesh and Telangana — account for 48 percent of the alcohol consumed in the country annually. The Naidu government also expected an increase in consumption due to the availability of standard drinks, including well-known brands that were not on the shelves during Jagan Reddy’s rule.

Significantly, of the total projected revenue of Rs 2.94 lakh crore, the Naidu government will raise Rs 71,000 crore from open market borrowings. The government debt during the financial year 2024-25 was estimated at Rs 5.60 lakh crore, which is 34.14 percent of the state’s gross domestic product (GSDP). The total outstanding public debt rose from Rs 2.57 lakh crore in FY 2018-19, which was 28.02 per cent of GSP.

The YSRCP called the state budget “highly misleading”, claiming that it did not have adequate allocations to meet its lofty promises and had started on a negative note. Former Finance Minister and YSRCP leader Buggana Rajendranath Reddy said the Budget was disappointing “as the people who were eagerly waiting for the fulfillment of the ‘Super Six’ promises failed to note proper allocations for it”.

For the TDP, however, there are outdated problems. “The previous government not only ignored the rules, but also played with people’s lives. Andhra Pradesh went into debt after the unscientific bifurcation in 2014 but was put on the fast track of development by the TDP government led by Chandrababu Naidu,” said Finance Minister Keshav. Andhra joined the elite club of developed states between 2014 and 2019 when Naidu was at the helm.

“The YSRCP regime shockingly destroyed the state’s reputation as a frontrunner, as well as its finances, by working for the personal interests of a few leaders. They ignored the interests of both the people and the state, and by the time they were out of power, the state’s financial position was on the verge of collapse,” Keshav alleged.

For the first time in the history of the state, two ballot budgets for the first eight months of the current fiscal year were presented in the state assembly. While the first ballot on account of Rs 2.86 lakh crore was passed by the Legislative Assembly, imposing Rs 1.09 lakh crore for the first four months of the financial year before the general elections, the NDA government, which has mandate in the elections held in May, presented a second vote on the budget for the four months from August to November.

Restoring Andhra’s financial status is an uphill task. As Keshav put it: “What we are doing is aimed at restarting the financial wheels of the state.”

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