Telangana's total revenue receipts stood at ₹35,721.81 crore, achieving only 16.20% of the annual budget estimate of ₹2,29,720.62 crore. It indicated a slow start to the fiscal year.
Published Aug 11, 2025 | 4:39 PM ⚊ Updated Aug 11, 2025 | 4:39 PM
Telangana's Q1 FY 2025-26 finances exhibited a challenging start with revenue shortfalls, elevated committed expenditures, and widening deficits. (iStock)
Synopsis: The fiscal deficit reached ₹20,266.09 crore (37.52% of the annual target), financed largely through borrowings. The primary deficit, excluding interest payments, was ₹13,493.24 crore (38.95%), underscoring that even without debt servicing, expenditures outpaced revenues. These deficits suggested early fiscal pressure, potentially leading to higher borrowing costs and reduced fiscal space for emergencies.
Referring to the Comptroller and Auditor General (CAG) report on Telangana’s finances for the first quarter of the 2025-26 financial year, BRS working president KT Rama Rao slammed the state government’s “incompetence” that was “crumbling the economy”.
“This is a serious red flag,” Rama Rao, popularly known as KTR, posted on X on Monday, 11 August. “I never thought we would have to witness this — the latest CAG Report screams alarm bells. There is a sharp decline in Telangana’s growth.”
The CAG report on the state finances for Q1 mentioned that fiscal management was fast spiralling out of control.
Telangana’s Q1 FY 2025-26 finances, as per the CAG’s Monthly Key Indicators (MKI), exhibited a challenging start with revenue shortfalls, elevated committed expenditures, and widening deficits.
While tax revenues showed resilience, weaknesses in non-tax and grants, coupled with low capital spending, were seen as risks to growth and sustainability.
The CAG MKI revealed significant deficits in Q1, diverging sharply from budgeted projections. The state budgeted a revenue surplus of ₹2,738.33 crore for the year, but recorded a deficit of ₹10,582.85 crore in Q1, equivalent to -386.47% of the target (indicating a massive overrun). The deficit arose from revenue expenditure (₹47,804.65 crore) exceeding receipts (₹35,721.81 crore).
The state utilised 37.52% of its fiscal deficit target in three months, signalling potential over-borrowing.
The MKI noted that in the first quarter of the current fiscal, Telangana’s total revenue receipts stood at ₹35,721.81 crore, achieving only 16.20% of the annual budget estimate of ₹2,29,720.62 crore. It indicated a slow start to the fiscal year, with collections lagging behind expectations.
Tax revenue, the largest component, performed relatively better at 20.38% of the budget, driven by strong collections in sales tax (22.60%) and the state’s share of Union taxes (23.85%).
GST, a major contributor, achieved 21.14%, suggesting steady economic activity in goods and services. However, state excise duties lagged at 16.64%, possibly indicating subdued liquor sales or enforcement issues in the quarter.
Non-tax revenue was particularly weak, realising only 3.37% of the target, with actuals of ₹1,066.22 crore against ₹31,618.77 crore budgeted. This category included income from mines, forests, and user charges, and the low achievement could signal delays in asset monetisation or administrative bottlenecks.
Grants-in-aid from the Center were dismal at 1.90% (₹433.77 crore), far below the budgeted ₹22,782.50 crore. This shortfall might strain the state’s ability to fund welfare schemes reliant on central support, such as those under centrally sponsored programmes.
Overall, the Q1 revenue performance reflected a conservative start, with tax revenues providing some buffer but non-tax and grants posing risks to meeting annual targets. If the trend persisted, the state might need to revise revenue mobilisation strategies mid-year.
Expenditure in Q1 totalled ₹52,559.96 crore (derived from revenue and capital combined), with a focus on revenue expenditure, which consumed the bulk of funds. The CAG report showed revenue expenditure at ₹47,804.65 crore (21.06% of the budget), while capital expenditure was ₹4,755.31 crore (13.03% of the budget).
Committed expenditures—salaries, pensions, interest, and subsidies—accounted for a significant portion, achieving 26.10% to 36.30% of their budgets. Subsidies saw the highest utilisation at 36.30%. Interest payments at 34.97% highlighted the burden of existing debt, while pensions (34.88%) reflect growing retiree liabilities.
Capital expenditure, crucial for infrastructure and growth, lagged at 13.03%, indicating delays in project execution or fund releases. This could impact long-term development if not accelerated in subsequent quarters.
The high pace of revenue expenditure (21.06%) compared to revenue receipts (16.20%) contributed to fiscal imbalances.
The fiscal deficit reached ₹20,266.09 crore (37.52% of the annual target), financed largely through borrowings. The primary deficit, excluding interest payments, was ₹13,493.24 crore (38.95%), underscoring that even without debt servicing, expenditures outpaced revenues. These deficits suggested early fiscal pressure, potentially leading to higher borrowing costs and reduced fiscal space for emergencies.
There was heavy reliance on debt. To bridge the deficits, the state resorted to substantial borrowings. The CAG report noted that the public debt receipts were ₹20,266.09 crore in Q1. The high fiscal deficit percentage (37.52%) implied accelerated debt accumulation.
The report underscored the need for monitoring under the Telangana Fiscal Responsibility and Budget Management Act. Continued reliance on debt for revenue shortfalls could elevate interest burdens, already high at ₹6,772.85 crore in Q1.
This is a serious Red Flag!
I never thought we would have to witness this – the latest CAG Report screams alarm bells. There is a sharp decline in Telangana’s growth
A failed Congress party’s governance results in a failed economy. They promised 6 guarantees but delivered only… pic.twitter.com/nl2Duu4xzm
— KTR (@KTRBRS) August 11, 2025
The CAG’s findings evoked a sharp reaction from the Opposition BRS. “A failed Congress party’s governance results in a failed economy. They promised six guarantees but delivered only a failed economy,” KTR said on X.
“Income is on a downward trend, and the debts are zooming up. This isn’t rocket science. This is plain math. Telangana’s economy is crumbling under the weight of Congress’s incompetence. “You projected a ₹2,738 crore surplus budget, but today, Telangana is looking at a ₹10,583 crore revenue deficit…just by the end of the first quarter.
KTR also noted the sharp decline in non-tax revenues. “Only 3.37 percent of the budgeted ₹2,26,720 crore was achieved! The government has already borrowed ₹20,266 crore, which is 37.5 % of the annual target.”
He alleged that the government had spent ₹20,266 crore without even laying a road or commissioning a new project, or without providing students with a decent square meal.
“Where is the expenditure going? Also, why is the economy in a free-fall? All those who made tall claims of Telangana economy being on autopilot, can they explain this phenomenon?” he asked.
KTR further sought to know from the financial experts in Congress their plan to bring the state’s economy back on track.
In a separate X post, the BRS said, “Instead of building wealth, attracting investments, boosting the economy.. Revanth is obsessed with political vendetta and PR drama.”
(Edited by Majnu Babu)
