The public debt of Andhra Pradesh has reached an alarming level and likely to deprive the cash-strapped State of any additional funds from the Centre.

Finance panel norms The much-awaited permission to increase fiscal deficit to 3.5 per cent from the 3 per cent according to the Fiscal Responsibility and Budget Management (FRBM) will not be extended to the needy State while others such as Telangana have already obtained the permission.

“Increase in FRBM limits are governed by the guidelines given by the Finance Commission and hence it simply depends on whether a State fulfils prescribed criteria or not,” Arvind Panagariya, Vice-Chairman, NITI Aayog, told BusinessLine while responding to a query on AP’s position on the sidelines of meeting here. .

Effectively, this will not allow Andhra Pradesh to go for higher market borrowing while other States enjoy that facility.

Loser on both counts According to a senior official, the procedural difficulties in increasing the deficit and borrowing limits for the State were made clear by the Centre in a meeting recently.

According to the existing norms, debt of a State should not exceed 25 per cent of the Gross State Domestic Product (GSDP) while interest amount payable on loans cannot go beyond 10 per cent of the revenue. Andhra Pradesh stands a loser in both.

According to the socio-economic survey 2015-16, its GSDP is estimated at ₹6.83 lakh crore while debts stood at ₹1.90 lakh crore accounting for 27.88 per cent of GSDP. Though the Central taxes devolution, grants and market borrowings are of similar magnitude for both AP and Telangana, AP has lost ‘significant’ portion of her resource base after division.

The shift of administration from Hyderabad to Amaravati and building of new capital city besides regular development expenditure is bound to further strain the financial condition.

comment COMMENT NOW