Faced with huge expenditure lined up on populist and welfare schemes and the challenge of dealing with the adverse economic impact of Covid-19, the Andhra Pradesh government is gearing for a tightrope walk in the upcoming State Budget 2021-22.

“The Budget preparation exercise commenced last week and is currently in a crucial phase with all departments working round the clock. It is expected to be completed soon,’’ a senior official in the Finance Department, Government of Andhra Pradesh, told BusinessLine .

Andhra Pradesh has been one of the States that witnessed a significant number of Covid-19 cases. It has been steadily conducting testing of almost 50,000 samples per day even though the number has now come down along with new cases of Covid being reported. It had earlier said it was spending over ₹10 crore pre day on controlling the pandemic.

With lockdown and subsequent gradual restart severely affecting economic activity in the state, the revenues to the Exchequer have drastically reduced, the unbudgeted expenditure on containment of the pandemic as well as the related relief, response and mitigation measures has increased the fiscal stress, according to the official.

In addition, the State government has also launched a slew of welfare schemes in line with its poll promise on Navaratnalu even during the pandemic month, which has deepened paucity of resources.

Infrastructure

There is also an urgent need for the State government to step up focus on creating infrastructure to attract both Foreign Direct Investment (FDI) as well as domestic investors.

Foreign Direct Investment (FDI) equity inflow into Andhra Pradesh has not been so impressive. As per latest data, the State stands 12th in India in terms of FDI inflows during October 2019-September 2020. With ₹1,798 crore FDI inflows, the State attracted just 0.45 per cent of total FDI.

On a comparative note, Telangana attracted ₹9,909 crore at 8th position while Maharashtra, Karnataka and Tamil Nadu attracted 79,216 crore, ₹58,204 crore and ₹4,292 crore, respectively.

Surprisingly, even though Andhra Pradesh ranks first in the Ease of Business Report for the last three years, it has not been translating into major investments in the State.

The possible reasons for subdued enthusiasm among the global investors in investing in AP is inadequate infrastructure (especially after the State bifurcation in 2014), lack of noteworthy infrastructure development in the last six years.

There has been clear tilt of Government focus more towards welfare and populist schemes as opposed to physical infrastructure development.

The special status promised before bifurcation by the Government of India still remains a distant dream and State government needs to factor in the need for facilitating industrial growth in the State and attracting investments as well.

Challenge

All these factors pose a big challenge to the State government, which has to do a balancing act in allocation of resources.

All Budget Estimating Officers have already been advised by the Finance Department to analyse the expenditure incurred on all non-salary items and make efforts to save at least 20 per cent of the expenditure for the next financial year.

Travelling allowances, office/administrative expenses. purchase of new vehicles (except for those for emergency services) is to be reduced the next financial year compared to the current fiscal year.

Some schemes may have to be wound up and some others merged with or transferred to the activities of other Departments. Eg: Post Metric Scholarships with Jagananna Vasathi Deevena,Vidya Deevena; allocation of resources shall be prioritised to Navaratnalu and other Government Priority programmes.

In the Budget for 2020-21 presented during the peak of Covid-19 pandemic in July last year, AP government pegged the total expenditure at ₹2,24,789 crore, a 28.6 per cent increase over the revised estimates of 2019-20.

In 2019-20, as per the revised estimate, total expenditure was estimated to decrease by 23.3 per cent (₹53,218 crore) from the Budget estimate.

But all this will be surely be different in the upcoming Budget for 2021-22.

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