Andhra Pradesh’s Debt Sustainability reached zero for FY 2022-23: NITI Aayog report

The State had also been unable to achieve its budget estimates under capital expenditure.
Andhra Pradesh’s Debt Sustainability reached zero for FY 2022-23: NITI Aayog report
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VIJAYAWADA: Andhra Pradesh is the only State in the country to have Zero Debt Sustainability as per the Fiscal Health Index 2025 released by NITI Aayog for the financial year 2022-23. It means the State is unable to service its debt obligations, potentially leading to deflation, which can severely damage its credit rating, limit access to future borrowing, and harm economic growth. Essentially it signifies a situation where the debt is completely unsustainable. The NITI Aayog’s revelation stands as a testimony to the deterioration of State’s financial health during the previous regime.

According to fiscal experts, when debt sustainability reaches zero, borrowers are no longer able to meet their debt obligations, potentially leading to default or debt restructuring. A default can disrupt financial markets, increase borrowing costs for other entities in the State, and discourage investments. Further, when the State is focused on managing its debt crisis, it may have fewer resources available to invest in infrastructure and other growth-oriented initiatives.

In its analysis, NITI Aayog observed that since 2018-19 the capital expenditure of the State came down in both social and economic service sectors by 84.3% and 60.1% respectively on a cumulative basis.

The State had also been unable to achieve its budget estimates under capital expenditure. Capex was 3.5% of the total expenditure, and just 4.4% of the total borrowings in 2022-23, the index stated.

AP in revenue & fiscal deficit over past 5 years: Report

Under the revenue expenditure, the quantum of committed expenditure constituted the largest share at -51%. It increased at an average annual rate of 11.6% in the last five years. Committed expenditure as a percentage of the revenue receipts increased from 57.5% in 2018-19 to 64.6% in 2022-23.

During the period 2018-19 to 2022-23, the State’s own tax revenue grew at a CAGR of -6%. The ratio of State own tax revenue to the total tax revenue saw moderate growth during the same period, from 64% in 2018-19 to 67% in 2022-23. The non-tax revenue over the last five years grew at an average annual rate of 4.3%. The rate of growth of own revenue had come down from 17.1% in 2018-19 to 9.8% in 2022-23

The State had always been in revenue deficit and fiscal deficit over the last 5 years. Public debt had increased at an average rate of 16.5% during the period 2018-19 to 2022-23. Interest payments increased by 15% in 2022-23 over the previous year and CAGR by 10% from 2018-19 to 2022-23. The ratio of interest payments to revenue receipts had shown an increased trend from 2018-19 to 2020-21, and slightly reduced in 2022-23 due to increased revenue receipts.

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