RBI red flags ‘richest’ TS debt ratio; AP improves

The Reserve Bank of India (RBI) said that the debt of Telangana State has increased to 22.2 per cent of its Gross State Domestic Product (GSDP) in the financial year 2017-18 as against 12.7 per cent in previous fiscal 2016-17.

In Andhra Pradesh, on the other hand, the RBI

THE RBI has pointed out that TS, AP are undergoing fiscal stress due to several factors, including loan waivers.

said the state debt has come down from 36.4 per cent of GSDP in 2016-17 to 27.3 per cent in 2017-18.

In its report, ‘State finances: A study of Budgets, the RBI has pointed out that states are undergoing fiscal stress due to several factors, including loan waivers, and said higher borrowing by them could crowd out private investment. TS claims to be the richest state in the country, but its debt burden is increasing year after year.

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The Reserve Bank of India in its report ‘State finances: A Study of Budgets’ has said in Telangana state the debt ratio in the Gross State Domestic Production has increased from 12.7 per cent in the 2016-17 financial year to 22.2 per cent in the 201819. After the bifurcation, Andhra Pradesh faced a financial crisis because it lost revenue due to bifurcation. However, the state has been able to reduce the debt ratio in GSDP.

It may be recalled that the Comptroller & Auditor General in every financial year has made strong remarks on the poor financial management of TS. In the southern states, Karnataka’s debt ratio in GSDP has increased slightly, from

18.6 per cent in 2016-17, to

18.7 per cent in 2018-19. In Tamil Nadu, in 2016-17 the ratio was 21.6 per cent and in 2018-19 it was 23.2 per cent. Kerala had a debt ratio in 2016-17 of 31.1 per cent and in 2018-19 it was

32.4 per cent.

The increase of the debt ratio in GSDP shows inefficient fiscal management. The RBI in its report pointed out that the non-development expenditure is increasing in TS.

In 2016-17 the non-development expenditure was 3.4 per cent and it has reached

35.2 per cent in 2017-18. To escape the Fiscal Responsibility and Budget Management Act, which imposes fiscal discipline on states and Centre, the TS government made off budget borrowings for schemes such as Mission Bhagiradha by floating separate corporations.