Telangana Rashtra Samithi (TRS) president K Chandrasekhar Rao returned as chief minister last December powered by a slew of welfare schemes implemented during his first stint. The same schemes are, however, expected to create a huge burden on the state exchequer as they have raised expectations that they will either be upgraded or extended to more people.
For instance, there is a proposal to hike the amount of financial assistance being provided to nearly 57 lakh farmers under the Rythu Bandhu scheme, which earned the TRS much goodwill in the December 7 assembly elections. Such a move will likely increase the government’s annual burden to ₹15,000 crore from ₹12,000 crore, according to official estimates.
Likewise, the CM has promised to double pension for senior citizens, the differently abled, widows and single women, the schemes having been a big factor in the TRS poll victory. Not just that, he has promised to reduce the age limit for old-age pension from 60 to 57 years. This will likely increase the annual expenditure on pensions from ₹11,600 crore to nearly ₹25,000 crore.
The TRS also promised to waive crop loans up to ₹1 lakh. During KCR’s earlier stint, such waivers cost the government about ₹17,000 crore. The estimate is that this time, too, the waivers will cost the exchequer the same amount, if not more. The quantum of outstanding loans is being assessed, a senior government official said, declining to be named.
{{/usCountry}}The TRS also promised to waive crop loans up to ₹1 lakh. During KCR’s earlier stint, such waivers cost the government about ₹17,000 crore. The estimate is that this time, too, the waivers will cost the exchequer the same amount, if not more. The quantum of outstanding loans is being assessed, a senior government official said, declining to be named.
{{/usCountry}}Several ongoing welfare schemes will continue, KCR has said. These include the Kalyan Lakshmi and Shadi Mubarak schemes that have a total annual allocation of ₹1,450 crore in the 2018-19 budget; the sheep distribution scheme that costs ₹5,000 crore; the ₹600-crore KCR Kits scheme, under which essentials are provided to a mother and her new born; and Rythu Bima (life insurance for farmers) that requires ₹976 crore.
The government will also have to fulfil its promise of constructing two-bedroom houses for the poor at a cost of ₹17,660 crore, apart from completing the ₹80,000 crore Kaleshwaram lift irrigation scheme and the ₹40,000 crore Mission Bhagiratha scheme to provide drinking water to every household. The TRS has also promised unemployment allowance from the next financial year.
Other promises include filling up around 70,000 vacancies in government jobs and raising the retirement age of employees from 58 to 61 years. The government is also expected to hike salaries as per the recommendation of the pay revision commission, but how much it will cost has yet to be ascertained.
Financial experts much fiscal prudence will be required to implement all these schemes. According to the first full-fledged budget of the state government presented in March 2015, the estimated revenue surplus is only ₹531 crore. Yet, the government started implementing its welfare schemes.
According to E Revathi, a professor of economics at the Centre for Economic and Social Studies, KCR could implement the schemes without much difficulty because revenues from Hyderabad and its surrounding districts of Ranga Reddy and Medak could be spent within Telangana. “In the combined Andhra Pradesh, the revenues from Hyderabad were being siphoned off to other regions,” she said.
As per the Telangana State Economic Survey, Hyderabad, Ranga Reddy and Medak accounted for about 45% of the Gross State Domestic Product, which has been growing at an average of 9%. Telangana’s GSDP at current prices increased from ₹5,05,849 crore in 2014-15 to ₹7,32,657 crore in 2017-18.
“There has been a consistent growth in state revenues, particularly from excise due to huge increase in liquor sales, stamps and registration due to a spurt in real estate activity and share in the GST. This enabled the TRS government to spend on welfare schemes and also infrastructure projects,” K Muthyam Reddy, retired professor in economics from Osmania University, said.
Reddy, however, added that the state government had borrowed indiscriminately to take up flagship schemes like Mission Bhagiratha and Mission Kakatiya, as well as the irrigation projects. According to budgetary figures, outstanding borrowings went up from ₹70,000 crore in 2014-15 to ₹1.7 lakh crore in 2017-18. Debt servicing on the loans shot up from ₹7,557.50 crore in 2015-16 to ₹11,138.60 crore in 2017-18. It is expected to go up to
₹22,280 crore by the next assembly elections.
The financial adviser to the Telangana government, G R Reddy, said the successful implementation of welfare schemes was a fact and people were getting benefits. “How the government could implement has been reflected in the government’s budget documents. There is no secret about it,” he said, refusing to elaborate further.
Telangana Congress spokesman Syed Nizamuddin said the TRS government would need about ₹2.5 lakh crore per year. With the present revenue from all sources being less than ₹1.5 lakh per annum, clarity was needed on how the huge deficit of over ₹1 lakh crore would be covered, he said.
“Will the TRS government borrow more funds to run the state? Will it increase taxes?” he asked, and demanded that the government bring out a white paper.