Telangana faces fiscal strain as revenue falls short of targets

Telangana’s finances show strain as tax collections fall short of projections and borrowing rises. CAG data highlights widening deficits, weak non-tax revenue and concerns over fiscal discipline, raising fears of increasing financial stress in the coming years

Hyderabad: Telangana’s fiscal trajectory is showing signs of strain, with the Congress government struggling to translate revenue growth into credible budget performance. According to the latest data in the Comptroller and Auditor General (CAG) report for 2025–26 up to February, tax revenues have shown a marginal recovery compared to the previous year, while the government fell short of its own projections.

Against a budget estimate of Rs 1.75 lakh crore, tax collections stood at Rs 1.39 lakh crore, which is just 79.34 per cent realisation. This marks an improvement over 2024–25 (75.46 per cent), but remains significantly below earlier benchmarks, including 81.4 per cent in 2023–24, 89.75 per cent in 2022–23 and 91.86 per cent in 2021–22.

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The gap between projections and actuals has widened concerns over fiscal planning. Except for State excise duties and Stamps and Registration, all other major components of tax revenue fell short of last year’s performance. The growth in Stamps and Registration target realisation has almost doubled from 38 per cent last year to 72 per cent during the current fiscal.

Non-tax revenue performance is particularly weak, with realisation capped at 28.8 per cent, indicating limited success in tapping alternative revenue streams.

The broader fiscal picture is more worrying. Total receipts were pegged at Rs 2.84 lakh crore, but actual inflows by February reached only Rs 2.31 lakh crore, which is 81.27 per cent of estimates. Of this, a substantial Rs 77,111 crore came from borrowings, pointing to the State government’s increasing dependence on debt.

This reliance has sharply inflated deficit indicators. The State, which budgeted for a revenue surplus of Rs 2,738 crore, instead recorded a revenue deficit of Rs 14,364 crore by February. Similarly, the fiscal deficit overshot projections, touching Rs 77,111 crore, which is 142.77 per cent of the annual estimate.

Even as capital expenditure was Rs 1.68 lakh crore, which is 132.67 per cent of projections, much of it is debt-funded, raising sustainability concerns. Meanwhile, central grants remain subdued at 26.95 per cent, adding pressure on State finances.

Financial analysts noted that despite incremental growth in tax revenue, the government’s inability to meet budget targets, coupled with heavy borrowing, signalled structural weaknesses. Without stronger revenue mobilisation and fiscal discipline, Telangana would be risking deeper financial stress in the coming years.