Telangana’s finances under pressure as revenue, capital receipts dip

A startling figure shows that net borrowings of ₹32,536.26 crore up to September this fiscal year make up nearly 30% of total receipts. In the previous fiscal, the state achieved about 45.62% of its budget estimates, with ₹1,18,559 crore out of ₹2,59,862 crore realized.

Hyderabad: Telangana‘s fiscal performance in the first half of the financial year 2024-25 has shown a marked decline in revenue and capital receipts compared to the same period last year. The State realised Rs.1,08,011 crore in total receipts i.e., around 39.41 per cent of the budget estimates of Rs.2,74,057 crore.

Shockingly, the net borrowings of Rs.32,536.26 crore till September this fiscal form nearly 30 per cent of the total receipts. During the previous fiscal, the State realised around 45.62 per cent of the budget estimates i.e. Rs.1,18,559 crore of Rs.2,59,862 crore.

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The overall revenue receipts reported a significant slump, achieving only 34.1 per cent of the budgeted estimates by September. This falls short of last year’s 40.27 per cent mark – a worrying factor about the strained State revenues. The State-owned Tax Revenue (SoTR), the largest component of the revenue receipts witnessed a decline, reaching 41.91 per cent of the budget estimate compared to last year’s 43.73 per cent. The SoTR collections are pegged at Rs.68,905.8 crore against target of Rs 1,64,397.64 crore.
This decline is partly due to a lower GST collection rate of 42.21 per cent, which lagged behind the 44.45 per cent achieved in the previous fiscal year. The GST collections are pegged at Rs 24,732.12 crore.

However, not all sectors faced downturns. Sales tax collections rose sharply to 48.08 per cent of the budget estimate, a substantial improvement over the previous year’s 37.75%, suggesting robust local market activity. Yet, these gains are offset by sharp drops in other streams, especially State excise duties, which slumped to 37.06 per cent, a drastic fall from last year’s 61.63 per cent, raising concerns about the sustainability of State revenue sources.

During the same period, the Capital receipts, vital for infrastructure development, also saw a downturn, hitting 61.64 per cent of budget estimates against last year’s 72.41 per cent. Borrowings and liabilities, representing the State’s reliance on debt, rose to 66.06 per cent, though still lagging behind last year’s 81.95 per cent. However, when it comes to amount, the State government borrowed Rs 32,536 crore in net compared to the previous year’s borrowing of Rs 31,333 crore, highlighting an increased dependency on borrowed funds to meet fiscal obligations.

Experts warn that the dip in the receipts points to the challenges Telangana faces in sustaining its ambitious revenue targets amidst fluctuating tax inflows and mounting capital liabilities. They suggested for shifting focus towards streamlining revenue sources and curbing reliance on borrowings. Whether the Congress government can address these hurdles effectively, will define the State’s economic health in the coming months, as well as its ability to meet developmental goals.