With strategic fiscal reforms and sustained coalition unity, the TDP can solidify its dominance. Failure to address fiscal constraints or meet voter expectations could embolden YSRCP, making the next few years difficult for Naidu.
Published Jun 01, 2025 | 11:00 AM ⚊ Updated Jun 01, 2025 | 11:00 AM
Andhra Pradesh Chief Minister and TDP chief N Chandrababu Naidu addressing the Mahanadu in Kadapa. (JaiTDP/X)
Synopsis: Chandrababu Naidu-led government is at a critical juncture, a year after taking over the reins of Andhra Pradesh. The dispensation lacks the finances to fulfil its promises and to take up ambitious projects that are part of the chief minister’s Vision-2047. The BJP-led government at the Centre has been taking a lenient approach towards the Andhra government. Naidu will have to employ all his skills and experience to steer the state clear of choppy waters.
The TDP-led NDA government in Andhra Pradesh is at a critical juncture, even as the dispensation under N Chandrababu Naidu is set to mark its first year in office on 4 June.
The coalition, comprising the TDP, BJP, and Jana Sena Party, stormed to power in 2024 with an unprecedented mandate, securing 164 of the 175 Assembly seats and 21 of the 25 Lok Sabha seats.
This resounding Naidu-led NDA’s victory reflected public discontent with the previous YSRCP government and high expectations for economic revival and reforms in governance.
However, a year on, the government’s performance remains in a “grey zone,” struggling to strike a balance between development and welfare, especially with the coffers running dry.
The TDP, after celebrating its first Mahanadu at Kadapa in the Rayalaseema region between 27 and 29 May for the first time in history, looks confident of the future and undaunted by the challenges.
TDP supremo and Chief Minister Naidu had promised to transform Andhra Pradesh into a land of milk and honey. He sought support for the continuation of his governance beyond the current term.
“For continued development and welfare, let us avoid the ‘snakes-and-ladders’ game. Let our government remain in the saddle and progress and development will stay on course,” Naidu, ecstatic with an unprecedented crowd appearing before him on the final day of Mahanadu, said on Thursday, 29 May.
By holding Mahanadu in the Rayalaseema heartland, he sought to send a message that his archrival YS Jagan Mohan Reddy’s YSRCP is now relegated to history, and the future belongs exclusively to the TDP, enabling it to undertake development works without bothering about the opposition administering any political shocks from behind.
After taking over Andhra Pradesh’s reins, the NDA government prioritised infrastructure and development to restore the state’s economic standing post-bifurcation. Naidu also began implementing Super Six (poll guarantees), but hard up with money, he could implement only one promise: providing three LPG cylinders free a year. He postponed the implementation of the remaining promises to a later date.
Though Naidu began implementing enhanced social security pensions of ₹4,000, it is not included in the Super Six package.
Naidu has, however, announced that he would implement the Thalliki Vandanam Scheme before the reopening of schools. The scheme would provide women ₹15,000 per school-going child per year for their education expenses and also free travel for women on RTC buses from Independence Day.
He, however, did not divulge the details. It is unclear if it would be on the lines of the one in implementation in Telangana, where women can travel on all ordinary and express buses anywhere within the state.
Naidu also referred to his promise of providing ₹20,000 to each farmer under the Annadata Sukhibhava Scheme, with the rider that he would order the payment after the Centre releases its component of ₹6,000. The entire amount would be paid to the farmers in three installments.
Then there are the unfulfilled promises of Ada Bidda Nidhi and Yuva Shakti. The Super Six promises, no doubt, pose fiscal challenges to the government.
Though the financial position of the state is not very encouraging, Naidu has accelerated progress on flagship projects like the Amaravati capital city and Polavaram irrigation project, two schemes close to his heart. The TDP has been reiterating that these projects were stalled during the YSRCP regime.
“Polavaram and the capital city of Amaravati are the two eyes of Andhra Pradesh,” Naidu had said while accusing the YSRCP of “deliberately delaying these projects, plunging the state into darkness”.
The government secured central support for Amaravati and Polavaram. The government said it is on course to complete Polavaram by December 2028.
Naidu’s engagement with the central government has yielded tangible results. For instance, his negotiations ensured financial backing for the Vizag Steel Plant, which he described as “a historic moment etched in steel”.
The government’s “Vision-2047” document outlines a long-term strategy for sustainable development, with initiatives like “WhatsApp Governance” enhancing transparency. Additionally, investments from global players like Google in Visakhapatnam signal a business-friendly environment, bolstered by Modi’s assurance of taxation stability.
The 2024 election victory marked a remarkable comeback for Naidu. JSP leader Pawan Kalyan’s grassroots mobilisation was pivotal, with his party winning all 21 Assembly seats it contested. Naidu’s return to the NDA fold, after an unsuccessful dalliance with the Congress-led UPA in 2019, did much good for him.
“With the people’s blessings, we shall herald a new era of prosperity under the leadership of the Prime Minister,” Naidu said. The coalition’s unity has strengthened TDP’s position both regionally and nationally, giving Naidu leverage in coalition negotiations at the Center.
But maintaining coalition unity remains a challenge, as differing priorities among TDP, BJP, and JSP could strain relations. The opposition, particularly the YSRCP, though weakened with only 11 Assembly seats, remains vocal as it has 40 percent of the vote share.
YSRCP leader Jagan Mohan Reddy, based in Vijayawada, has dared Naidu to arrest him in any of the scams that the state government was “fabricating”. He questioned the government’s authority and the delays in implementing the welfare schemes.
Another difficult area is managing finances. The TDP-led government inherited a dire financial situation. The 2025-26 budget projects a public debt of ₹1.03 lakh crore, with off-budget borrowings at ₹5 lakh crore, reflecting efforts to address fiscal mismanagement under YSRCP.
Naidu’s administration has secured significant central support, including over ₹50,000 crore (4 percent of Andhra’s GDP) in the 2024-25 Union Budget, with ₹15,000 crore for Amaravati and funding for Polavaram. But Finance Minister Payyavula Keshav’s sobering reminder should bring the TDP to its senses.
Presenting the 2025-26 budget, he cited a NITI Aayog report, which pointed out that Andhra Pradesh has reached a zero-debt sustainability stage. He, however, explained the efforts being taken to increase revenue by 12% through tax compliance and subsidy rationalisation.
Andhra Pradesh’s fiscal challenges remain formidable, and Naidu does not wield a magic wand. The state’s fiscal deficit of ₹79,926 crore (4.38% of GSDP) exceeds the RBI’s recommended 3% threshold, with cumulative debt at 35% of GSDP. High debt servicing costs (₹44,000 crore annually) and off-budget liabilities constrain fiscal flexibility.
The state’s reliance on RBI facilities—Special Drawing Facility (₹6,564.26 crore average, 28 days), Ways and Means Advances (₹1,905.35 crore average, 25 days), and Overdraft (₹2,581.48 crore average, 9 days)—reflects fiscal distress.
Revenue receipts (₹2,18,002 crore) fall short of expenditure (₹2,98,000 crore), necessitating borrowing. Welfare scheme allocations, such as Thalliki Vandanam (₹9,407 crore vs. required ₹12,000 crore) and Deepam 2.0 (₹2,601 crore vs. ₹4,000 crore), are insufficient.
The TDP’s strong mandate and Naidu’s experience provide hope for recovery. Its 16 Lok Sabha seats, which the BJP needs to remain in power at the centre, enhance its influence in national policymaking, securing central support for projects like the Arcelor Mittal Steel Plant and river-linking initiatives like Polavaram-Banakacharla, which Naidu terms a game-changer in drought-proofing the Rayalaseema region.
Continued focus on Amaravati and Polavaram, alongside investments from global players like Google, could cement TDP’s development-oriented image. JSP’s regional popularity, led by Pawan Kalyan, ensures coalition stability, while technology-driven governance appeals to younger voters. The “Swarna Andhra @ 2047” vision provides a long-term roadmap.
The state government has initiated some measures already, such as taking up the 2025 Fiscal Restructuring Plan, targeting a 12% revenue increase through tax compliance and reduced power subsidies. A ₹2,000 crore Viability Gap Funding corpus for PPP projects will leverage private investment for infrastructure, reducing fiscal strain. Naidu’s requests for a 90:10 funding pattern for centrally-sponsored schemes could secure additional resources, as seen in the case of the Vizag Steel Plant.
The major red flag is Andhra Pradesh’s zero-debt sustainability rating, which restricts borrowing, forcing reliance on central funds and PPP models. Stagnant tax revenues and high interest costs limit fiscal maneuverability, with revenue receipts falling short of expenditure needs. A large sum of ₹5 lakh crore in off-budget borrowings creates hidden pressures, complicating fiscal planning.
Underfunded schemes like Thalliki Vandanam could trigger public discontent if promises are not met. YSRCP, biding its time to strike, has already raised its voice over the state’s precarious financial position. This apart, the 16th Finance Commission’s potential debt-to-GDP restrictions could force austerity, limiting spending.
Naidu appears confident of navigating the choppy waters. But delays are inevitable in implementing welfare schemes as the fiscal situation remains grim, and coalition dynamics may pose problems in the future. Naidu has to reckon with political challenges too. He must keep unpredictable Deputy Chief Minister Pawan Kalyan content.
As Nara Lokesh rises in the government, Naidu should ensure it does not become a sore point for Pawan Kalyan, who is technically No. 2. This is a tricky challenge for Naidu, as he must promote Lokesh while ensuring Pawan Kalyan does not feel sidelined.
The government’s ability to navigate these challenges hinges on Naidu’s political management skills, ability to leverage central support, enhance revenue, and prioritize high-impact projects like Polavaram and Amaravati.
With strategic fiscal reforms and sustained coalition unity, the TDP can solidify its dominance. Failure to address fiscal constraints or meet voter expectations could embolden YSRCP, making the next few years difficult for Naidu. He appeared very confident at Mahanadu, but the proof of the pudding lies in the eating.
“So far, the TDP-led NDA has made all the right moves. With whatever money is in the coffers, it is trying to strike a balance between welfare and development. At the moment, the NDA government is going steady,” Prof. DAR Subrahmanyam, a political commentator and educationist in Guntur, said.
“The pain point is the growing dissatisfaction among women over Thalliki Vandanam, which is yet to be implemented. Naidu has not paid in the first year, and his promise to pay in the second remains to be seen if it will be implemented,” he pointed out.
“Naidu should take care not to allow a public discourse that freebies are detrimental to the economy. It is now happening surreptitiously, and he should check it, or people would lose faith in him. I have full appreciation for the Naidu administration in the state and the NDA at the Center for fast-tracking Amaravati and Polavaram projects, which are essential for the state,” Prof Subrahmanyam added.
(Edited by Majnu Babu).
