While YS Jagan disburses ₹2.54 lakh crore through welfare schemes, Andhra Pradesh may soon become the only state in India without an official capital and the sole southern state without any metro rail projects.
YS Jagan Mohan Reddy and Chandrababu Naidu.
Even as the YS Jagan Mohan Reddy government claims to have disbursed ₹2.54 lakh crore through welfare schemes, Andhra Pradesh remains the only state in India without its own official capital and the sole southern state without any metro rail projects.
The politics in Andhra Pradesh currently revolve around two key regional parties: the YSRCP, which seeks to retain power, and the TDP, which aims to be elected for the second term since the bifurcation of the state in 2014.
In the run-up to the Assembly and parliament elections, the ruling YSRCP is primarily banking on its campaign on the welfare pitch and exploring the possibilities of a new manifesto with more welfare schemes.
Surprisingly, the Opposition TDP, which was earlier emphasising development, is also now pitching with welfare promises.
This is happening at a time when Andhra Pradesh is allegedly lagging in development.
Notably, the ten-year joint capital status of Hyderabad for Andhra Pradesh is set to end this June. The state may remain the only state in India without an official capital and the sole southern state without any metro city.
While both parties blame each other, alleging neglect of development and claiming credit for certain portions of the progress in the state, South First analyses past budget trends and has further reached out to various sections of the public and economists for their views on welfare vs development.
Chief Minister YS Jagan Mohan Reddy — who assumed office in 2019 — has been campaigning on welfare reforms through the popular promise, ‘Navaratnalu’ (welfare schemes — literally means nine gems).
He further claims that he introduced a volunteer system, where an employee of the village secretariat identifies beneficiaries, averaging 50-70 houses assigned to each volunteer. The amounts from the schemes are then directly sent to the bank accounts of the beneficiaries.
YS Jagan emphasises that he eliminated the middleman system that existed during the previous TDP regime. Earlier, the Janmabhoomi panels, consisting of local TDP rank and file, used to decide on the list of beneficiaries for government schemes, and the monetary benefits would be distributed at panchayats or designated places.
Now, under the present regime, as many as 29 schemes, including the nine popular welfare schemes in Andhra, operate through direct benefit transfers (DBT).
During the Assembly’s vote-on-account budget session, as per the presentation given by YS Jagan, he claims to have disbursed ₹2,54,818 crore through 29 direct benefit transfer (DBT) schemes in the past five years. The popular schemes include fee reimbursement, scholarships, pensions to elderly women and loans to women co-operative societies.
Additionally, he mentioned that ₹1,07,898 crore were disbursed through non-direct benefit transfer in eight schemes in the same period.
These eight schemes include power subsidies for the marginalised communities, a mid-day meal scheme in schools, distribution of school kits, and Byju’s tablets for eighth-grade students.
Breaking down the amount spent on the welfare schemes per annum over the last five years, it comes to an average revenue expenditure of around ₹72,500 crore for the state exchequer.
In this context, it would be worthwhile to go into the debate on welfare schemes, popularly known as ‘freebies’.
Prime Minister Modi took a dig at the AAP and the Congress during the UP elections of 2022, for using freebies to win elections through shortcuts.
In August 2022, a case filed by BJP leader Ashwini Upadhyay reached the Supreme Court, where he sought that political parties should be asked to stop promising freebies during election campaigns.
The YSRCP had impleaded in the case, saying that everything can’t be generalised as “freebies”, and it is the elected government’s responsibility to deliver schemes to end poverty by providing healthcare, education, and jobs.
On the other hand, Chandrababu Naidu — credited for “developing” Hyderabad — who had earlier focused on the party’s success in development, investments and IT is setting a new tune of pitching for welfare this time.
Chandrababu Naidu had criticised the YSRCP government in Andhra for disbursing welfare schemes through debts, likening the state to a debt crisis similar to Sri Lanka.
Naidu and his TDP leaders — who have been vocal against the YSRCP — changed their tune as the elections are approaching, notably after taking note of the Congress wins in the Karnataka and Telangana elections, which also promised welfare schemes.
Similarly, TDP released the first part of the two-part manifesto, ‘Bhavishyathuku Guarantee’ (Guarantee for a bright future) in August 2023 during Mahanadu and birth centenary celebrations of party founder and actor NT Rama Rao.
The guarantees include financial assistance to women above 18 years of age, school-going children, farmers, and unemployed youth, free bus rides for women, and three free gas cylinders per family per year.
Further, rejecting the allegations of YS Jagan that choosing the TDP would halt existing welfare schemes, Naidu not only assured to implement the new six promised schemes but also to continue the old schemes initiated by the present government.
Naidu also seems to be pitching for his dream project of Amaravati as the sole capital, against the YSRCP’s proposal of three capitals.
Earlier, Jagan repealed the three Bills that sought to replace Amaravati as capital and assured to introduction of fresh capital Bills but did not do so till now.
It is estimated that the TDP’s first instalment of six promises, along with other schemes to be continued by any government, would cost around ₹1,00,000 – 1,20,000 crore per annum.
While the YSRCP is delivering welfare schemes with an average of ₹72,500 crore per annum, the TDP’s promises would result in an estimated ₹1,00,000 crore per annum.
As per the recent vote-on-account budget for 2024-2025, the estimated income is approximately ₹2,86,389.27 crore, with revenue expenditure estimated at ₹2,30,110.41 crore and capital expenditure receiving only ₹30,530.18 crore.
Andhra Pradesh’s debt has been accumulating since the bifurcation of the state. As per the statement released by the state finance minister, at the time of the bifurcation, the total debt stood at ₹1,53,346 crore. By the end of the five-year TDP regime, it had surged to ₹4,12,288 crore. With the YSRCP coming into power, the total debt has further increased, reaching ₹7,03,000 crore, as of February 2024.
Whoever wins and forms the government, there will be a potential surge in revenue expenditure to fulfil election promises, while capital expenditure may either remain unchanged or see a further reduction.
The trend of committed expenditure from 2014-2023.
The estimated revenue expenditure figure of ₹2.30 lakh crore for 2024-2025 may appear substantial and capable of accommodating welfare schemes in line with election promises, but a deeper examination reveals that only a small portion would be left for the actual implementation of the promises.
The main component is a committed expenditure, which takes more than half of the share of the revenue expenditure of the state.
As per the Comptroller and Auditor General (CAG) reports of 2014-2023, the committed expenditure, covering expenses such as salaries, interest payments, and pensions, generally comprises about 50 percent of Andhra Pradesh’s total revenue expenditure.
This allows only the remaining fifty percent for other commitments, such as fulfilling election promises and meeting the required expenses for department-wise upgrades or new initiatives. This would certainly result in a fiscal deficit, prompting the state to resort to borrowing.
The fiscal deficit represents the gap between total receipts and total expenditure, excluding borrowings. This gap indicates the extent to which expenditures are covered by borrowings.
The fiscal deficit has seen an upward trend, increasing from 2.11 percent of GSDP in pre-bifurcated Andhra Pradesh to nearly 3.9 percent in the first year of the bifurcated state and to 4.29 percent of GSDP as per revised estimates of 2023-2024.
Both the TDP and the YSRCP governments have surpassed the GSDP threshold of the Fiscal Responsibility and Budget Management (FRBM) limits, borrowing to finance revenue expenditure.
The trend of revenue receipts in Andhra Pradesh.
While the Capital Expenditure in the state was ₹7,000 crore in 2014-2015, it is ₹7,244 crore for the year 2022-2023. The utilisation of borrowed funds for capital assets has been consistently limited over the years. In an ideal scenario, borrowed funds should be directed towards investments in capital projects.
However, examining the CAG’s reports during the TDP tenure from 2014-2019, ₹1,40,938 crore was borrowed to address the deficit, with ₹75,909 crore allocated to Capital Expenditure.
Under the YSRCP government, as indicated by the CAG’s 2022-2023 budget report from 2019-2023, ₹2,30,391 crore were borrowed, but only ₹65,815 crore were allocated to Capital Expenditure.
The trend of revenue receipts in Andhra Pradesh.
With less focus on capital expenditure, which would create sources of revenue in the long term, and increased capital revenue expenditure, the sources of revenue in Andhra Pradesh have been limited.
Andhra Pradesh heavily relies on revenue from SGST, taxes on sales and trade, and a dependence on the central share of funds.
CAG reports for the past nine years, from 2014 to 2023, indicate that the Andhra Pradesh government gets most of the revenue through the devolution of funds and Grants-in-aid from the government of India, rather than the state-owned tax and non-tax revenue.
Professor RV Ramana Murthy, Dean of the School of Economics at the University of Hyderabad, told South First that it appears YS Jagan has been implementing the promised schemes but a singular focus on wealth distribution could potentially reduce the growth rate and hinder development.
“Revenues will cease to increase, and debt servicing will continue to rise. At some point, he may struggle to pay for either debt servicing or committed expenditure,” he said.
Murthy further said: “However, the unequal distribution of wealth in society has driven people to aspire for their needs, and the government, representing them, is responding. It would be unjust to argue against providing welfare. Hence, there exists a contradiction between the economy and society.”
IYR Krishna Rao, a BJP leader and former bureaucrat who served as the first chief secretary of the bifurcated Andhra Pradesh, said that unless there is a correction in the political parties’ manifestos, there is no sustainable path forward for the state.
He said that while YS Jagan has managed to sustain this approach for years, it may not be viable in the near future.
“As far as I am concerned, whoever gets defeated is the fortunate one,” Rao remarked with reference to the escalating debts and low revenue that hinder the realisation of the manifesto promises.
In Vijayawada, the epicentre of Andhra politics, about a dozen people gathered at one of the popular tea centres in NTR Circle. When South First approached a tea stall owner, S Rajesh, for his views on welfare and development, he expressed dissatisfaction with the welfare schemes in Andhra Pradesh.
He mentioned that his business has gradually declined since 2019 when YS Jagan proposed the three capitals.
Rajesh noted that when the capital was initially announced in April 2015, there was a significant increase in traffic and workers used to visit his shop. However, after Covid, his business has been struggling.
He further stated that even though welfare schemes are being provided, the government is retrieving the money through increased taxes on electricity, alcohol and other commodities.
A customer, R Chaitanya, became agitated with Rajesh’s response, stating that his family has benefited from the welfare schemes and wouldn’t have received the same advantages if the capital was constructed.
Lakshmi who runs a fruit juice stall nearby joined the conversation, expressing that while she receives welfare schemes, her business has suffered due to the changes in capital plans.
She shared her frustration, saying, “I receive around ₹15,000-20,000 from Vidya Deevena annually for my child. Is it sufficient for our family’s survival?”
Rajesh countered, denying that the blame shouldn’t be solely on YS Jagan, asserting that inflation is a global issue. He added that he knows many poor families that wouldn’t have survived during Covid-19 without the Andhra Pradesh government’s welfare schemes.
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