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Tough financial challenges ahead for Andhra's Jagan Mohan Reddy

The soon-to-be chief minister of Andhra Pradesh may have a lot more to do since he will be heading a state that is not necessarily in the best of its financial health.

twitter-logo E Kumar Sharma        Last Updated: May 24, 2019  | 22:10 IST
Tough financial challenges ahead for Andhra's Jagan Mohan Reddy
Rising debt, pending financial bills and limited options to raise revenues are major challenges for the new Andhra Pradesh government.

After a long wait at the end of 3,678-kilometre long padayatra across the state, Y S Jagan Mohan Reddy, the leader of YSRCP party in Andhra, has taken his party to a victory. In a palpable ebullient note put out by his party soon after the elections results were announced, the victory was seen as a "rewriting of the grammar of Andhra Pradesh polity and setting out a narrative of people's agenda". But, the soon-to-be chief minister of Andhra Pradesh may have a lot more to do since he will be heading a state that is not necessarily in the best of its financial health. Rising debt, pending financial bills to be cleared and limited options to raise revenues are all bound to pose major challenges for the new government.

"Today the Debt to GSDP (Gross State Domestic Product) ratio is at 30 per cent, higher than 25 per cent prescribed under the FRBM (Fiscal Responsibility and Budget Management) Act, which means 17 to 18 per cent of the budget goes only towards payment of interest on principal as against just around 5 per cent in 2014 when the new state was formed," says Ajeya Kallam, former chief secretary of Andhra Pradesh, who has looked at state finances closely over the years. That apart, he learns that there are apparently a lot of pending financial bills from the last financial year, which still need to be cleared.  What perhaps compounds the problem is the limited options to raise revenues or to turn to non-treasury borrowings. "The regular borrowings have touched Rs 2.5 lakh crore and non-treasury borrowings another Rs 1 lakh crore," says Kallam. It means the regular debt is more than double the number around 2014.

ALSO READ:Chandrababu Naidu quits as Andhra Pradesh CM after TDP's loss in Assembly

What happens to the new state capital Amaravati and how the decentralisation will take place as promised by YSRCP party is the question most are pondering over. For instance, will the high court be in Rayalaseema or north coastal Andhra and will the capital be in Amaravati or elsewhere? Some still refer to it as a step that keeps with the gentlemen's agreement of 1950s between the then two regions of Andhra and Rayalaseema under the Sribagh agreement when Andhra was separate from Chennai. Also, one needs to wait and watch as to what sort of funds the new government wants to spend on the capital. For example, it could be done on the lines of Naya Raipur, the new capital of Chhattisgarh.

The big challenge for the new government seems to be how it meets the election promises of giving out sops and distributing money under various schemes and at the same time making up for capital expenditure that the state badly needs. The entrepreneurs that Business Today spoke to said that they would like to wait and watch, at least for the moment.

ALSO READ:YSRC's YS Jaganmohan Reddy to take over as Andhra Pradesh CM on May 30

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