Andhra Pradesh Chief Minister YS Jagan Mohan Reddy is facing severe backlash from all quarters and the reason is that he is driving the state into severe debts! With huge cash needs to meet the welfare programmes as well as other regular expenses, the state is not in a position to meet the needs and has conveniently taken loans which has drawn it into debt trap! Will Jagan be able to pull out the state from the debts?
Financial crisis reveals state situation
Issue of AP’s debts came to light today when the Telugu Desam Party (TDP) Rajya Sabha MP Kanakamedala Ravindra Kumar raised the question. It has been clearly mentioned that the state government has borrowed Rs 57,479 crore from state owned banks during the period April 1st 2019 to November 30th 2021. AP’s revenue deficit is at 662.80 per cent while the fiscal deficit was up by 107.79 per cent in the first half of the 2021-22 financial year.
Earlier, it has been reported that the Comptroller and Auditor General of India (CAG) has pointed out lapses, both constitutional and procedural, in financial management by Andhra Pradesh government. The audit report for the financial year 2019-20 was tabled in the state Legislature.
Some of the prominent issues red flagged by the CAG are:
a) non-disclosure of off-budget borrowings running up to Rs 26,096.98 crore in budget documents;
b) transfer of Rs 1,100 crore related to the State Disaster Relief Fund to personal deposit account in violation of rules;
c) 80 per cent of borrowings utilised to balance revenue accounts affecting asset creation;
d) “unacceptable” argument to amend the Fiscal Responsibility and Budgetary Management Act in December 2020 to reset targets relating to the five-year period from 2015-16 to 2019-20;
e) effective capital expenditure amounted to just 0.72 per cent of the GSDP and finally, unsustainable level of debt to GSDP ratio.
The CAG went on to mention that the expenditure of the state was mainly focused on social services, which include education, health and welfare activities. In fact, welfare activities constituted 18 per cent of the total expenditure in Andhra Pradesh and around 13 per cent was spent on education, sports among others. In this respect, the CAG agreed that “development expenditure and expenditure on social services as a proportion of total expenditure were higher in the State compared to the other general category states.”
It also found fault with the government for not expending enough on asset creation. “This reflects poorly on the State’s commitment towards infrastructure creation,” the report said.
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The financial situation of AP has become bait for opposition to attack Jagan government. The state Bharatiya Janata Party (BJP) said the Jagan government has pushed the state into a debt trap, as evident from Rs 1,45,600 crore worth loans taken by it since 2019. They observed that funds are being spent on welfare initiatives with an objective to improve individual fame, instead of revenue generation programmes.
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