CAG flags Andhra’s alarming financial position in 2024-25

Andhra faces a severe financial crisis with rising revenue and fiscal deficits, increased borrowing, and decreased capital expenditure, CAG report reveals

Andhra Pradesh suffered a severe financial crisis during 2024-25 in the first year of the current Telugu Desam Party-led coalition government as indicated by huge revenue and fiscal deficits, sharp fall in capital expenditure and worsening debt sustainability, the Comptroller and Auditor General (CAG) of India revealed in its report, which was tabled in the state assembly on Friday.

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According to the report, the revenue deficit, which refers to the gap between revenue receipts and revenue expenditure, shot up to ₹60,285 crore in 2024-25, as against ₹38,683 crore the previous financial year.

Similarly, fiscal deficit, which is the gap between total receipts (excluding borrowings) and total expenditure, which was ₹62,720 crore at the end of 2023-24, went up sharply to ₹81,071 crore.

“In fact, the 2024-25 annual budget projected a revenue deficit of ₹34,743 crore and fiscal deficit of ₹68,743 crore. But both the figures went up abnormally,” the report said.

The CAG pointed out that the state’s revenue deficit for 2024-25 was 3.75% of the gross state domestic product (GSDP), far exceeding the fiscal responsibility and budget management (FRBM) target of 2.7% of the GSDP. Similarly, the fiscal deficit was 5.05% against the mandated 4% ceiling.

This has forced the state to borrow even for day-to-day expenses, significantly increasing its interest burden. During 2024-25, the Andhra Pradesh government availed ₹42,004 crore special drawing facility from RBI for 71 days and paid ₹188.82 crore as interest; ₹73,897 crore as ways and means advances for 179 days and paid ₹82.30 crore as interest and ₹56,631 crore overdraft for 107 days and paid ₹32 crore as interest.

“The minimum cash balance of ₹1.94 crore with the RBI was maintained by the state government for only eight days without availing any ways and means advances,” the CAG report said.

It further pointed out that during 2024-25, the total receipts for the state were only ₹2,49,191 crore as against budget estimates of ₹2,69,928 crore, a shortage of nearly ₹20,000 crore. This includes a shortage of ₹18,748 crore in tax collections and ₹4,603 crore in non-tax revenue.

The CAG also pointed out that during 2024-25, the state government had indulged in borrowings of ₹87,773 crore, but spent only ₹21,173 crore on capital expenditure, accounting for just 24%. “The government is supposed to borrow funds primarily for capital or asset creation, aiming to generate long-term income streams from these investments. But it has not done any capital assets creation,” the report said.

In fact, borrowings had gone up by 16.08% in 2024-25 over the previous year, reflecting increased dependence on external financing. “But capital expenditure has registered a decline of 12% during the same period, indicating a reduced emphasis on long-term asset creation. This shows lack of fiscal discipline and long-term financial sustainability,” the CAG said.

The report also pointed out that the government had failed to spend substantial amounts of funds for various departments despite making allocations in the budget.

The CAG also expressed concern over alarming public debt and other liabilities of the state, which showed a net increase of ₹81,071 crore (16.68%) over the previous year due to raising of new long term market loans. In addition to directly raising loans, the state governments also stood guarantee to the loans raised by statutory corporations, government companies and corporations, and cooperative societies etc. from the market and financial institutions for implementation of various schemes and programmes. “But the state government has not disclosed the quantum or source of these off-budget borrowings (OBBs) in its budget,” the CAG said.