Telangana’s fiscal woes deepen as revenue declines, deficit widens, borrowings surge in 2024-25

Latest report by Comptroller and Auditor General (CAG) paints a troubling picture of a government under severe financial strain and increasing dependence on borrowings to stay afloat

Hyderabad: The Government of Telangana is staring at an increasingly fragile fiscal condition as the State’s provisional accounts for 2024-25 reveal sharp slippages in revenue mobilisation and an alarming rise in both revenue and fiscal deficits.

Against a budgeted revenue surplus of Rs 297 crore, Telangana ended the year with a revenue deficit of Rs 8,782 crore, a steep reversal indicating that the government spent significantly more than it earned in recurring income and affecting the State’s ability to fund development and welfare programmes without incurring debt.

The latest report by the Comptroller and Auditor General (CAG) paints a troubling picture of a government under severe financial strain and increasing dependence on borrowings to stay afloat.

The State’s fiscal deficit, which is the gap between total receipts and expenditure excluding borrowings, stood at Rs 48,322 crore, nearly touching the budget estimate of Rs 49,255 crore. Though the percentage utilisation (98.11 per cent) may appear within control, it must be viewed in the context of reduced revenue receipts, which have left the State with less internal capacity to repay or manage debt sustainably.

Revenue receipts fall short
Telangana realised only 75.85 per cent of its estimated revenue receipts, i.e. Rs 1.68 lakh crore against the Rs 2.21 lakh crore target, falling short by a massive Rs 53,000 crore. During previous fiscal, the State generated nearly 78 per cent of the revenue receipts.

Tax revenue was down to Rs 1.36 lakh crore from a projected Rs 1.64 lakh crore. Notably, stamps and registration receipts collapsed to just 46.48 per cent of the projections, while excise collections also lagged, achieving only 72.6 per cent of the target. The non-tax revenue hit just 67 per cent of estimates and grants-in-aid from the Centre also remained only 36.5 per cent of the expected amount.

However, the State’s net borrowings stood at Rs 48,322 crore, accounting for over 98 per cent of the budgeted estimate. While capital expenditure marginally overshot targets with Rs 36,209 crore against Rs 33,486 crore, it was serviced by debt rather than tax revenues.

The report also debunked the Congress government’s claims of spending nearly Rs 8,000-10,000 crore per month towards debt servicing. The interest burden continues to mount, with the State spending Rs 26,688 crore on interest payments, 150 per cent of the annual budget estimate. Pensions and salaries also exceeded budget projections, together consuming over Rs 59,000 crore.

Experts warn
With weak revenue mobilisation, mounting welfare costs and a near-constant dependence on borrowings, Telangana’s fiscal health is under pressure. Experts cautioned that the State’s revenue deficit has widened dramatically, and the room for new expenditure or welfare expansion is shrinking fast. Unless the government boosts its revenue base or receives substantial central assistance, they said Telangana would face an uphill task maintaining fiscal discipline in the year ahead.