Telangana Congress government’s borrowing spree raises red flags

Set to borrow Rs 17,400 cr in first quarter of 2025-26, surpassing budget projections. Despite initial plans for Rs 14,000 cr, the additional borrowings raise concerns about fiscal sustainability and the rising burden of long-term debt

Hyderabad: The Revanth Reddy government continues its aggressive borrowing trajectory, with fresh indications that Telangana’s debt could once again exceed Budget projections for the current financial year.

With the State government issuing a fresh indent worth Rs 4,000 crore to be auctioned in four tranches on June 17, the state’s borrowings for the first quarter of 2025-26 are set to surpass its initial projections.

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According to the Reserve Bank of India, the bonds include Rs 1,000 crore each with tenures of 33, 34, 35, and 36 years — unusually long-term borrowings compared to the maximum limit of 30 years during the BRS regime.

Despite earlier proposing Rs 14,000 crore in borrowings for the first quarter of 2025-26, the state is now set to raise a total of Rs 17,400 crore, Rs 3,400 crore more than initially planned.

Sources indicate that another Rs 2,000-Rs 3,000 crore could be borrowed within the next two weeks, pushing the quarterly borrowing to at least Rs 5,400 crore more than projected.

Officials stated that market borrowings for April and May, as per projections, were Rs 4,000 crore and Rs 5,000 crore, respectively. However, they were forced to raise additional funds in June to meet the demands of the Rythu Bharosa scheme and other expenses.

The Rythu Bharosa incentive for Vanakalam (Kharif) alone requires around Rs 9,000 crore, in addition to arrears for Yasangi (Rabi).

The market borrowings for the financial year 2025-26 are estimated to be Rs 64,539 crore. However, if the current pace continues, Telangana could breach that ceiling, just as it did in the previous fiscal year.

Experts warn that the government’s over-reliance on long-term debt, coupled with rising interest burdens, could severely constrain future development spending. The mounting loans also raise concerns about fiscal prudence and the sustainability of welfare schemes amidst dwindling revenues.