Telangana in Debt: What do the figures say?

Hyderabad: The recent revelation of Telangana's financial status, as presented in the State Finances White Paper in the Assembly by Deputy CM Bhatti Vikramarka, paints a concerning picture. Over the last decade, the state and its Special Purpose Vehicles (SPVs) have encountered an astronomical surge in debt. In 2014-15, the total debt stood at ₹72,658 crore, escalating to a staggering ₹6,71,757 crore, marking nearly a tenfold increase. The burden is likely to increase to Rs 3.86 lakh crore by the end of this fiscal. In February the Union Minister of State for Finance in reply to a question asked by Congress MP N Uttam Kumar Reddy in the Lok Sabha, stated that “ in 2014-15 the outstanding debt of Telangana was Rs 83,698 crore with a year-wise increase in outstanding debt of Rs 8121 crore… while in 2021-22 the debt was Rs 2,83452 crore an increase of Rs 39,433 crore".

This unprecedented spike in debt has catalyzed an immense strain on the state's financial health, severely compromising its capacity to manage and repay the debt burden. More alarmingly, this substantial influx of borrowed funds has failed to translate into tangible fiscal assets proportional to the colossal expenditure.

The new government states that the absence of substantial assets or infrastructure corresponding to the excessive funds disbursed over the past decade exacerbates the critical nature of this fiscal imbalance. The state finds itself at a crossroads, grappling with the repercussions of this disproportionate debt accumulation.

The state's financial trajectory is evident from its historical records. In 2014, Telangana boasted positive balances throughout the year, a testament to its robust financial stability. However, the recent data paints a less rosy picture, indicating that the state now sustains positive balances on less than 10% of the days. This transformation underscores the colossal strain on the fiscal framework, marking a descent from a position of financial strength to one fraught with instability and debt-induced stress.

According to Provisional Estimates detailed in the Telangana Economy report by the Directorate of Economics and Statistics, released by the new government under Revanth Reddy, Telangana’s Gross State Domestic Product (GSDP) at current prices in 2022-23 is Rs. 13,13,391 crore, with a growth of 16.3% higher than India’s growth 16.1 per cent. Telangana's Per Capita Income (PCI) at current prices in 2022-23 is Rs. 3,12,398, Rs 1,40,122 higher than the National PCI (1,72,276).

Based on the Compound Annual Growth Rate (CAGR) of PCI at current prices for Telangana and India from 2014-15 to 2022-23, the average citizen in Telangana can expect his/her income to double in 5 to 6 years. In contrast, the average citizen in the country as a whole would have to wait for about 8 years for their income to double. According to the Ministry of Statistics and Programme Implementation (MoSPI), Telangana ranked 3rd among all states, in Per Capita Income in 2022-23.

Several factors might have contributed to this distressing financial situation. The lack of commensurate investment in developmental assets, despite the considerable inflow of funds, raises questions about the state's fiscal strategy and allocation of resources. Understanding the roots of this financial crisis demands an in-depth analysis of the expenditure patterns and investment decisions made by the state authorities over the past decade.

The data and statements unveiled by the current administration, albeit concerning, may be framed to emphasize the severity of the financial situation. However, a deeper analysis reveals that the preceding government's allocation of funds, particularly in vital sectors such as education and health, was notably inadequate. This deficiency in funding for essential areas might have significantly contributed to the current financial predicament faced by Telangana.

Addressing this burgeoning debt crisis necessitates a multifaceted approach. Stricter fiscal discipline, prudent expenditure management, and a comprehensive review of investment strategies become imperative to alleviate the strain on the state's finances. Moreover, a transparent and accountable fiscal policy coupled with measures to stimulate economic growth and revenue generation will be instrumental in mitigating this fiscal turmoil.

Additionally, fostering collaborations with financial experts, consultants, and relevant stakeholders could offer valuable insights and solutions to navigate this intricate financial quagmire. Implementing structural reforms, enhancing governance efficiency, and fostering a conducive business environment may also contribute to rejuvenating the state's fiscal landscape.

In conclusion, the exponential surge in debt highlighted in the Telangana State Finances white paper underscores a dire need for immediate and strategic interventions. As Telangana grapples with this daunting fiscal predicament, a concerted effort involving astute fiscal management, prudent investment strategies, and a commitment to transparency and accountability will be pivotal in steering the state away from the precipice of a fiscal catastrophe.