Telangana’s fiscal health worsens; sees sharp decline in revenue

Heavy reliance on borrowing pushes State’s fiscal deficit to Rs 64,456 crore, already overshooting the full-year estimate, say experts

Hyderabad: Notwithstanding the claims of the Congress government, the fiscal health of Telangana continues to weaken. Official data for February 2025 has shown a sharp decline in revenue receipts and a steep rise in borrowings and liabilities. The State has managed to collect only 61.53 per cent of its budgeted revenue receipts by February-end, compared to 70.16 per cent during the same period last year.

In contrast, capital receipts soared to 122.12 per cent of the budget estimates, driven almost entirely by a dramatic rise in borrowings and liabilities, which have touched Rs.64,456.79 crore which is nearly 130 per cent of budget estimate of Rs.49,255.41 crore.

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While total revenue receipts stood at Rs 1,36,136 crore against the annual estimate of Rs 2,21,242 crore, the worrying sign lies in the poor performance of non-tax revenue and specific tax heads. Non-tax revenue collection collapsed to just 17.25 per cent of the target, down from 91.39 per cent during the same period last year – indicating a critical shortfall in expected earnings from departments.

In tax revenue, the State earned Rs 1,24,054 crore of the targeted Rs 1,64,397 crore which is about 75.46 per cent against last fiscal’s 81.41 per cent. Particularly alarming is the crash in Stamps and Registration, with just Rs 7,033 crore collected, achieving a mere 38.58 per cent of the target. This is a sharp fall from 70.16 per cent in 2023-24, reflecting sluggish real estate activity and systemic lapses. While revenue expenditure has touched Rs 1,64,268 crore which is 74.35 per cent of the budget estimate, it is not excessively high relative to last year.

Experts indicated that the underperformance on the revenue front suggests either a slowdown in economic activity, poor enforcement, or a structural weakness in revenue mobilisation systems. Similarly, they cautioned that the heavy reliance on borrowing has pushed Telangana’s fiscal deficit to Rs 64,456 crore, already overshooting the full-year estimate. This reflects 130.86 per cent utilisation against the target, with one more month left in the fiscal year.

The revenue deficit, projected to be a marginal surplus in the budget, has instead widened to Rs 28,132 crore. With pension spending also breaching limits (132.98 per cent), the State’s fixed costs are crowding out developmental expenditure.

Adding to the concern is the interest burden, with the government having spent Rs.24,078 crore on interest payments i.e. 135.81 per cent of the estimated Rs 17,729 crore. This suggests that a growing portion of fresh borrowings is being diverted just to service old debt, leaving limited room for capital expenditure or welfare programmes.

In totality, Telangana’s financial position reflects an urgent need for course correction. The State must focus on improving tax collection efficiency, reviving non-tax revenue streams, and controlling wasteful expenditure. Without immediate steps, the continued debt dependence and widening deficit could severely impact its long-term fiscal stability, financial experts said.

Reacting to the poor performance of the State in tax revenue collection, former Finance Minister and BRS legislator T Harish Rao said this decline was unprecedented, except during the COVID-19 pandemic. He reminded that Telangana had achieved a 12 per cent CAGR (Compounded Annual Growth Rate) in tax revenue growth under the BRS regime between 2014-15 and 2022-23. “The faulty policies of the Congress government have resulted in reduced growth. Shame on it for failing Telangana and its State Own Tax Revenue (SOTR),” he added.