It is a great feeling when you get what you want, when you need it the most. More so for a politician trying to sustain power. Satisfied, euphoric, smug? Andhra Pradesh Chief Minister Nara Chandrababu Naidu would not have been mishearing the tune if all three emotions were flowing through him after the presentation of the Union Budget.
So what did AP get in Budget 2024-25? Finance Minister Nirmala Sitharaman allocated Rs 15,000 crore for this year and promised additional amounts in the future for Naidu’s pet project of building Amaravati, the new state capital.
Second, a special package—with an unspecified amount—was mentioned for completing the remaining works on the Polavaram irrigation project, which has a revised cost estimate of Rs 17,144 crore. The project would be a lifeline for AP and is expected to augment the country’s food security. Naidu recently claimed that over 70 percent of the project had been completed in his earlier term, but the deadline had been pushed back because of his successor’s lopsided priorities. Things should again speed up towards completion if there are no unexpected hurdles.
Third, Sitharaman promised to help develop the Visakhapatnam-Chennai industrial corridor (VCIC) on a priority basis. This is part of the Centre’s Purvodaya plan covering Bihar, Jharkhand, Odisha and West Bengal. It should pave the way for development of the backward northern Andhra districts and the Orvakal (Kurnool) node along the Hyderabad-Bengaluru industrial corridor. Naidu had also requested the inclusion of the Koparthy industrial node of the VCIC.
The Union finance minister also assured grants for Rayalaseema—the most economically backward region of the state where Naidu hails from.
Prestige vs practicality
Does AP really need a grandiose capital like Singapore worth tens of thousands of crores of rupees? Or is it to satiate Naidu’s personal vanity when there are more pressing demands knocking on his door? With the Centre’s largesse, he can afford to breathe easy for now. Coming with an estimated price tag of Rs 40,000 crore—a number that could easily escalate, as happens for all projects of this sort—it really is grandiose. The state surely can make do with a less expensive, functional capital and some of the funds can be allocated to more needy sectors.
A quick look at the state’s budget gives an idea of how things are. The interim budget for 2024-25 presented by the previous state finance minister in February laid out a revenue expenditure of around Rs 2,30,110 crore and capital expenditure of Rs 30,530 crore. The revenue deficit was estimated at Rs 24,758 crore or 1.6 percent of the gross state domestic product (GSDP) and the fiscal deficit at Rs 55,817 crore or 3.5 percent of the GSDP. The revised estimate for 2023-24’s revenue deficit was around Rs 31,535 crore (2.2 percent), whereas the fiscal deficit was Rs 60,154 crore (4.2 percent).
The allocations hold for now, till the new state government presents a full budget. The strong welfare focus is evident with Rs 71,740 crore, nearly a quarter of the total outlay, kept for various social schemes.
As of now, the financial snapshot of AP is like this. The total borrowing of the government and public sector undertakings—both guaranteed and not guaranteed by the state government—stood at Rs 6,38,217.85 crore on March 31, 2023. Further, with a debt ratio of 33 percent of the GSDP of Rs 14.49 lakh crore, it is not exactly a pleasant picture to the lender’s eyes. Compare this with neighbouring Telangana—though it’s not a fair economic comparison, but because the two are tied at the hip—which is 23.8 percent of its GSDP of Rs 14 lakh crore. So, debt servicing is a formidable task.
There are also other promises Naidu has to keep. The most prominent is his election manifesto’s mention of spending Rs 1,50,000 crore on welfare schemes—nearly double the amount his predecessor spent and almost half the present annual budget. The big question is what all these promises would leave for other sectors. As an ally with benefits, Naidu can perhaps hope to get more bonanzas for the state from the Centre—but that too has its limits.
In the short term, Naidu could resort to the schoolboy economic trick of imposing new taxes or cesses. But it could be counterproductive right after his big mandate. Liquor duties in a high-consumption state like AP could be another quick source. The latest official revenue from the sector was over Rs 25,000 crore, but it can be much higher if the business’s rampant corruption is checked.
Encore of 1998?
As chief minister of the unified AP, in 1998, Naidu secured a Rs 2,200-crore loan from the World Bank, one of the earliest such loans in the country. It was for his Rs 3,300-crore Andhra Pradesh Economic Restructuring Programme, a five-year scheme. At the time, Naidu had said, “The programme is aimed at making qualitative difference in the lives of the poor.” Can he, in 2024, do an encore? He is also credited with making Hyderabad an IT services hub. With such a personal brand value, he should be in a better position than most chief ministers in courting investors and lenders.
The leitmotif of the new Naidunomics should be to avoid getting carried away by the Centre’s largesse and to put the money where the mouth is.
(Views are personal)
Satya Nagesh Ayyagary | Senior journalist based in Hyderabad