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Revenue receipt worries for Andhra; execution of expenditure plans for Telangana

Industry is upbeat about both the Telangana state budget, released on Monday, March 14, and the Andhra Pradesh budget presented last Thursday, March 10. Reason: both talk of higher allocations for key sectors.

By E. Kumar Sharma | March 18, 2016 | Updated 12:47 IST

Industry is upbeat about both the Telangana state budget, released on Monday, March 14, and the Andhra Pradesh budget presented last Thursday, March 10. Reason: both talk of higher allocations for key sectors.

However, at a broad level, talk to economists and those who have looked at the fiscal numbers of the two newest states of India closely, and worries appear on two fronts: For Andhra, there seems a tendency to make some unrealistic revenue receipt expectations for the coming year. And for Telangana, the big challenge could be how well it is able to execute some of its major capital expenditure plans.

For example, take the stamps and registration fees in the Andhra budget. The budget estimates of 2015/16 for collections under this were Rs 3,500 crore and the revised estimate was also Rs 3,500 crore but now the revised estimate for 2016/17 under this head is Rs 5,180 crore. The total collection under this head even in the undivided Andhra Pradesh was in the region of Rs 4,500 crore. What's more, reaching the current target of around Rs 3,500 crore has apparently been with measures like revision of market rates, which at best, can be a one-time affair and not a yearly practice.

Similarly, for Telangana, take the example of irrigation. The budget has made an allocation of Rs 25,000 crore for this sector, which many say has been unthinkable so far even in the undivided Andhra Pradesh. Spending it fruitfully in a year is not easy. Similarly, its plan to construct 200,000 double-bedroom houses for weaker sections will have its own set of challenges - finding the land and completing them will not be easy.

The upshot: Expenditure has its own set of execution challenges. But then, ask those in the industry and the response is upbeat. In response to the budget by the Andhra government, Suresh Rayudu Chitturi, Chairman of the Andhra Chapter of the Confederation of Indian Industry (CII) and the Vice Chairman and Managing Director of Srinivasa Hatcheries Group, says: "The government has backed up its claims by allotting increased funds to agriculture, technology and education. I am very happy with the Rs 100-crore allotment to food processing. Plus, the allotment made for the Polavaram project is very positive."

But then, on the Polavaram project, there has been a commitment by the government of India to reimburse the expenditure. Summing up the measures announced by the two state budgets, N. Sreedevi, Associate Professor, Centre for Economic and Social Studies in Hyderabad, says: "While the need of the hour for both the states is focus on fiscal management, the challenge for Andhra is the continuing revenue deficit and an increase in fiscal deficit. The state also seems to be hoping to receive more from Centre in the form of grants." She sees a source of concern in the fact that the "growth rates of revenue expenditure and capital expenditure are more or less same for Andhra at around 22 per cent over the revised estimates of the previous year".

In the case of Telangana, she says that it is able to show an increase in revenue surplus because there is an expected 27 per cent increase in revenue receipts as against a 23 per cent increase in revenue expenditure. However, she feels, much would depend now on how the state is able to fruitfully spend the higher capital expenditure.

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