Balancing welfare and debt in Telangana

Like the Centre, states too tend to live beyond their means. More so, Telangana. In the 2021-22 Budget, the state allocated about Rs 45,000 crore for all welfare schemes put together. Now Dalit Bandhu, a scheme under which SC beneficiaries are given Rs 10 lakh each to start their own business, joins the list with an estimated allocation of a whopping Rs 30,000 crore. The budget for welfare is now disproportionately very large compared to the state budget whose size is Rs 2.3 lakh crore.

Telangana Finance Minister T Harish Rao sought to explain how poorly the Indian economy fared in 2020-21 compared to Telangana’s. But he did not have a proper answer on how the state could foot the outsized welfare bill, except claiming that revenues could be augmented by selling non-performing assets—implying lands in and around Hyderabad—apparently encouraged by the state mopping up Rs 2,000 crore recently by auctioning lands in Kokapet on Hyderabad’s outskirts.

At the same time, it is heartening to note that Telangana is doing well compared to the nation on several parameters including GDP/GSDP and per capita income. In 2020-21, the nation’s GDP growth rate was -3% while Telangana’s GSDP was 2.4%, the minister pointed out. But the comfort is short-lived if one looks at how welfare, wages and pensions could devour about 70–80% of the revenue expenditure of Rs 1.69 lakh crore in the current fiscal, leaving very little money for taking up new development projects. It would become inevitable that a part of the fresh debt of Rs 49,300 crore meant for asset creation would go towards meeting the government’s commitments.

Despite the huge cumulative public debt of Rs 2.86 lakh crore, the state is resorting to an ambitious welfare programme. The Telangana chief minister ought to ensure that the state does not fall into a debt trap.