Tightrope budget ahead as Congress govt gears up for Assembly session after Feb 26
Facing weak revenues and rising debt, the Telangana government is preparing a cautious 2026–27 Budget with limited fiscal space. While Central transfers offer some relief, balancing welfare promises and financial discipline remains a major challenge
Hyderabad: With the urban local body poll heat subsiding, the Congress government in Telangana is preparing for a difficult exercise of framing the 2026–27 State budget amid weak revenue growth, mounting debt and limited fiscal space. The Assembly session is expected to commence after February 26 and function for 10 to 15 days, with the State budget likely to be tabled in the first week of March.
The Finance Department has already received proposals from all departments online, with the Chief Secretary completing preliminary reviews and reportedly keeping rough estimates ready. Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka will hold department-wise consultations from Monday, before final discussions with Chief Minister A Revanth Reddy to freeze allocations.
Unlike previous years, the government is reportedly proceeding cautiously. Officials admitted that there were no significant gains for Telangana in the recent Union Budget. They were directed to ensure that revenue projections and total outlay were realistic to avoid large shortfalls during the fiscal year, as happened this year.
In 2025–26, the State presented a budget of Rs.3.04 lakh crore, including Rs.2.26 lakh crore as revenue expenditure and Rs.36,504 crore as capital outlay. However, receipts till December stood at Rs.1.9 lakh crore, just 67 per cent of projections, restricting revenue expenditure to Rs.1.34 lakh crore and capital expenditure to Rs.42,691 crore.
Raising concerns, borrowings accounted for Rs.65,930 crore, nearly one-third of total receipts and higher than the projected Rs.54,009 crore. Outstanding debt has crossed Rs.5.04 lakh crore, indicating growing dependence on loans. Meanwhile, tax revenues reached Rs.1.13 lakh crore against a target of Rs.1.75 lakh crore. As a result, revised estimates for the current year are expected to drop to between Rs.2.6 lakh crore and Rs.2.8 lakh crore, reflecting revenue stress.
There is some relief from Central transfers. Telangana’s share in Central taxes is expected to increase from Rs.29,280 crore in 2025–26 to Rs.33,181 crore in 2026–27. The award of the Finance Commission of India may fetch another Rs.6,000 crore this year. Funds under Centrally Sponsored Schemes are projected to rise to nearly Rs.30,000 crore from Rs.22,000 crore last year. Officials observed that together, these could bring an additional Rs.18,000 crore, though much depends on performance-linked releases and utilisation conditions.
Under these circumstances, the 2026–27 outlay is expected to range between Rs.3.2 lakh crore and Rs.3.25 lakh crore. Officials indicated that the net expansion over last year may be modest after adjusting revenue shortfalls.
However, political pressure is said to be heavy, with the government planning to allocate funds for implementing a few electoral promises. Sources said key focus areas include Indiramma housing, fine rice bonus for farmers and free bus travel for women. Social pensions under the Cheyutha scheme are also likely to be increased by around Rs.500 from April 2026.
At the same time, allocations to non-core sectors may be rationalised. With debt already high at Rs.5.04 lakh crore, officials have been tasked with containing borrowings and the interest burden, setting up a tightrope walk for the authorities.
With limited tax buoyancy and no major fiscal windfall from the Centre, the upcoming Budget will test the government’s ability to balance welfare promises with fiscal discipline.
