Telangana exhausts 37.5 percent of annual borrowing limit in first quarter

Telangana's government is facing increasing financial strain, with its borrowing in the first quarter of 2025-26 reaching an alarming 37.5 percent of the state's annual borrowing limit. Despite modest growth in tax receipts, non-tax revenues continue to lag, and the state is facing a widening fiscal deficit.

Hyderabad: In a worrying pattern, Telangana consumed nearly 37.52 per cent of the State’s annual borrowing limit within a span of just three months. The State raised a massive Rs 20,266 crore through market borrowings against an annual estimate of Rs 54009.74 crore in the first quarter of 2025-26, which is the highest ever market borrowing by the State government in the last five financial years.

In the first quarter over consecutive years, the State government secured Rs 17,670.45 crore in 2020-21 and Rs 12,891.7 crore in 2021-22 through market borrowings, due to the adverse economic impact of Covid-19 pandemic. In the subsequent years, the then BRS government obtained Rs 5,436 crore in 2022-23 and Rs 15,876.5 crore in 2023-24. Officials have informed that the State recorded the highest percentage of 51.52 percent of actuals against budget estimates, due to adjustments pertaining to Central loans obtained during the Covid-19 period.

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However, after the Congress came to power, the State government availed Rs 13,171 crore of loans in the first quarter of 2024-25 which is 26.74 per cent of the annual estimates and Rs 20,266 crore loan in the current fiscal which is nearly 11 per cent higher than the previous fiscal.

Experts raised red flags, pointing to an increasing dependence on debt to plug widening gaps between income and expenditure. While overall receipts rose to Rs 57,500 crore, driven by a modest uptick in tax collections, revenue mobilisation continues to lag behind projections.

Revenue receipts for April-June were Rs 37,222 crore, only 16.2 per cent of the targeted Rs 2.3 lakh crore, with tax revenue forming the bulk at Rs 35,722 crore. While the tax revenue collections stood at 21 percent of annual estimates in the first quarter of 2024-25, it remained marginally lower at 20.38 percent in 2025-26, indicating an economic downturn. Non-tax revenues and grants-in-aid, however, continue to underperform, realising just 3.4 per cent and 1.9 per cent of their annual targets, respectively.

The State had budgeted a revenue surplus of Rs 2,738 crore for the current financial year. Instead, it recorded a revenue deficit of Rs 10,583 crore in the first quarter which is a negative swing of nearly Rs 13,300 crore. Fiscal deficit stood at Rs 20,266 crore which is equal to borrowing amount.

Committed expenses continued to dominate revenue expenditure with nearly 61 per cent of the revenue collections (Rs 37,221 crore), being consumed towards interest payments, salaries, pensions, and subsidies, locking up a significant share of resources. Capital expenditure is pegged at Rs 4,755.31 crore i.e. 13 per cent of the total estimates spent for development works which is lower than the previous financial year’s 18.1 percent of annual target.

Analysts warned that front-loaded borrowing could tighten fiscal space for the rest of the financial year. Unless non-tax revenues and central grants improve significantly, the State may face increasing pressure to contain expenditure growth, even as rising interest costs and welfare commitments strain the treasury.