Andhra Pradesh government rebuts analysis of ‘Opposition’ economic expert on state’s finances

AP Special Secretary Krishna Duvvuri said that Rao had only ended up exposing his lack of basic understanding of public finances.

ByRaj Rayasam

Published May 11, 2023 | 6:02 PMUpdatedMay 11, 2023 | 6:02 PM

AP CM Jagan Mohan Reddy speaking in the state Parliament. (Screengrab)

Marking yet another spat between the ruling YSRCP government in Andhra Pradesh and the Opposition TDP, a senior official on Thursday, 11 May, dismissed as irresponsible and illogical the statement of an expert “promoted by the Opposition party and the media amenable to it” on the state’s finances.

Speaking to media persons in Vijayawada, Andhra Pradesh Special Secretary Krishna Duvvuri said that the “so-called financial expert” had only ended up exposing his lack of basic understanding of public finances — even as he provided a detailed counter to the expert’s claims.

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‘Wanted to mislead people’

Krishna said the objective of the expert, the economist Dr GV Rao who was interviewed on media outlets of the Eenadu group, appeared to be to mislead the people and create panic among them that the state was on the brink of a financial collapse.

He added that clarifications were being provided on several issues raised by Rao, claiming that the Opposition party’s expert had tried to pedal lies and half-truths.

Krishna took exception to Rao making disparaging remarks not only against the state but also against
institutions such as the Reserve Bank of India (RBI) and the Comptroller and Auditor General of India (CAG).

“The intent of the Opposition-affiliated media and the extent to which they can stoop has come out in the open,” he said.

He dismissed as misrepresentation the observation that Andhra Pradesh was in a deep debt trap and the situation had deteriorated further under the YSRCP government.

He pointed out that the RBI, which releases a report on state finances, has put Andhra Pradesh’s liabilities at the end of March 2023 at ₹4,42,442 crore.

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Outstanding liabilities

“Here one needs to take into consideration several other aspects. The outstanding liabilities of the combined state of Andhra Pradesh as of 31 March, 2014, were ₹1,96,202.40 crore. To this, ₹7,333 crore had been added as it was the fiscal deficit for the first two months of the 2014-15 financial year,” he said.

“Of this, as per the State Reorganisation Act, 58 percent was devolved to the successor state of Andhra Pradesh. Therefore, we can say that the liability of the state of Andhra Pradesh at the time of the formation of the TDP government in June 2014 was ₹1,18,051 crore and the same has increased to ₹2,64,451 crores as of 31 March, 2019,” he added.

He also claimed that the TDP government, which was in power till the end of May 2019, had borrowed another ₹7,346.56 crore in the first two months of the fiscal year 2019-20.

“Therefore, by the time the TDP government demitted office, the liabilities had swollen to ₹2,71,797.56 crore. Total liabilities, after the inclusion of non-guaranteed liabilities, were ₹1,53,346.8 crore, ₹4,12,288 crore, ₹6,51,789 crore, respectively, in the years 2014, 2019, and 2023,” he noted.

He also claimed that the outstanding liabilities had increased by 169 percent during the five-year TDP period.

“This translates to a compounded annual growth rate of the liabilities of 21.87 percent during 2014-19. As against that, the outstanding liabilities increased by only 58 percent during the five-year YSRCP rule from 2019-2023, translating to a compounded annual growth rate of only 12.69 percent during the period,” he elaborated.

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Concerns over borrowings

Noting that rumours were being circulated concerning the borrowings, he said the Andhra Pradesh Fiscal Responsibility and Budget Management (FRBM) Act, 2005, stipulates that the state can provide guarantees to government institutions for raising loans.

“When the state government is presenting all these details in the same manner as was done under earlier dispensations, the expert’s claim that the state was concealing information was highly improper,” Krishna said.

He said that a PSU can only raise  funds either as a loan from public sector banks or from financial institutions or by selling NCDs (Non-convertible debentures) issued on a private placement basis.

“The Centre has indicated that the aggregate of loans given by the banks to the PSUs in Andhra Pradesh was slightly lower than what is declared by the state government. This is because of the liabilities on account of NCD issuances under SEBI guidelines. Therefore, saying that there was some hidden borrowing somewhere is baseless,” he said.

Krishna said that the debt increase during the period of the present government was not higher than
what was accumulated during the period of the TDP government, both in terms of absolute numbers and CAG numbers.

“The outbreak of the Covid-19 pandemic resulted in an estimated revenue loss of ₹66,116 crores. In view of all this, how could one say that the fiscal management was not on sound lines?” he asked.

He also said the charge against the state government that the entire debt was going towards wasteful expenditure was preposterous and baseless.

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‘Not understanding objectives’

“The Opposition is terming some of the programmes as freebies without understanding their objectives. Painting the programmes of socio-economic importance with the same brush, to say the least, is an insult to the constitutional mandate,” he said.

Krishna said it was pertinent to recall how the TDP government splurged ₹5,000 crore raised through the auction of State Development Loans (SDLs) on a single day on 9 April, 2019.

“The so-called expert has alleged that the government has increased the tax burden on the people but he failed to substantiate the claim,” he said.

He said another charge against the YSRCP government was that the per capita debt has increased.

“The per capita debt, as per the CAG report, is ₹70,416 as of 31 March, 2022. The per capita debt at the time of the bifurcation of the state was ₹23,326. The same had increased to ₹50,157 during the five-year TDP rule, which is almost double the previous amount,” he noted.

“In such a case, why were the experts silent then? Today, even though the increase is not comparably as high, the expert says that even the unborn child has a debt burden on his head. In such a case, according to the expert, on whom was the debt burden then?” he asked.

Answering another issue raised by the expert, he said that it was not possible to divert funds without first depositing them in the consolidated fund of the state.

“As per Article 266 of the Constitution, the entire revenues of the government would form part of the consolidated fund of the state and there is no means by which anyone could divert state revenues. The allegations made in the article not only cast aspersions on the state government but also on the Constitutional and legal framework, the RBI, CAG and the government accounting itself,” he said.