Telangana’s fiscal health under strain as spiraling borrowings raise concerns

Tax revenue, the primary contributor, has also seen a dip in performance, achieving just Rs 1.02 lakh crore, which is around 62.07 per cent of the targeted Rs 1.64 lakh crore, compared to 65.37 per cent last year

Hyderabad: Telangana’s financial health appears to be under severe strain with significant shortfalls in revenue receipts, subdued tax collections and mounting borrowings, as revealed in a comparative analysis of fiscal performance up to December 2024 against the corresponding period of the previous financial year.

As per the latest report released by the Comptroller and Auditor General, the revenue receipts for the current financial year reached Rs 1.12 lakh crore, which is only 50.76 per cent of the Budget estimate of Rs 2.22 lakh crore, a marked decline from 57.72 per cent in the corresponding period of 2023-24.

---

Tax revenue, the primary contributor, has also seen a dip in performance, achieving just Rs 1.02 lakh crore, which is around 62.07 per cent of the targeted Rs 1.64 lakh crore, compared to 65.37 per cent last year.

Key components such as Goods and Services Tax (Rs 37,664.91 crore) at 64.28 per cent of the target against 67.03 per cent last year, and Stamps and Registration (Rs 7,524.42 crore) at 41.28 per cent of Budget estimates against 57.59 per cent last year, have underperformed, reflecting slower economic activity and weak tax enforcement.

While the Sales Tax revenue of Rs 24,035.11 crore surged to 71.86 per cent against 56.33 per cent, the State Excise Duties continue to struggle at Rs 14,078.39 crore, which is 54.96 per cent of the target against 82.98 per cent achieved last fiscal.

Notably, non-tax revenue is in free fall, achieving only 15.59 per cent of the Budget estimate, a stark contrast to 89.14 per cent in the previous year. Similarly, grants-in-aid and contributions have reached only 22.05 per cent, despite a higher allocation i.e. Rs 4,771.44 crore, indicating insufficient Central transfers.

Meanwhile, capital receipts paint a concerning picture, with 91.28 per cent of the budgeted borrowings and liabilities utilised by December 2024, up from 84.45 per cent last year.

Borrowings alone have reached a staggering 97.81 per cent of their Budget target of Rs 49,255.41 crore. The fiscal deficit has already hit Rs 48,178.94 crore, nearing the annual target, while the revenue deficit has worsened, plunging to Rs 19,892.85 crore compared to a surplus of 6.63 per cent last year.

Revenue expenditure has marginally increased to 59.83 per cent of the Budget, slightly above the previous year’s 58.9 per cent. Capital expenditure, though at 75.54 per cent of the Budget, has seen a drop in efficiency from 83.68 per cent for the corresponding period last fiscal, with several infrastructure projects reportedly delayed due to funding constraints.

The capital expenditure accounted for Rs 25,295.76 crore against the target of Rs 33,486.5 crore for the current financial year.

Economists warn that the State’s over-reliance on borrowings amidst poor revenue collection indicates a looming fiscal crisis. With a fiscal deficit nearing the brink and critical social and economic sector allocations under-utilised, immediate corrective measures are imperative.

Analysts stress the need for robust tax reforms, improved non-tax revenue mechanisms, and prudent fiscal management to avert a deeper financial turmoil.