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The Comptroller and Auditor General of India (CAG) has tabled its latest audit of the State’s Finance Accounts for 2024–25 in the Andhra Pradesh Assembly on March 6th, highlighting excessive borrowings, reduced capital expenditure, deteriorating debt sustainability and severely restricting fiscal space for future growth.
Deficit indicators, revenue generation and expenditure management are the major yardsticks for judging the fiscal discipline of any government. CAG report highlights the shortcomings across all these financial indicators.
Revenue Shortfall :
According to the report, the total receipts for the state were only ₹2,49,191 crore against the budget estimates of ₹2,69,928 crore, a shortage of nearly ₹20,000 crores. Also, the Revenue Expenditure of ₹2,27,961 crore for 2024-25 is less than the Budget Estimates (₹2,91,639 crore) by ₹63,678 crore.
Deficit Indicators :
Revenue Deficit, meaning the gap between revenue receipts and expenditure receipts) is ₹60,285 crore in 2024-25 against ₹38,683 crore from the previous financial year i.e 3.75% of the Gross State Domestic Product (GSDP), far exceeding the Fiscal Responsibility and Budget Management (FRBM) set fiscal target of 2.7%, forcing the government to borrow for day-to-day expenses and thereby increasing its interest burden.
Fiscal Deficit, meaning the gap between the total receipts (excluding borrowing) and total expenditure is ₹81,071 crore against ₹62,720 crore from the previous financial year i.e 5.05% of the GSDP, exceeding the FRBM set fiscal target of 4%. Indicating the extent to which government expenditure is financed by borrowing.
Borrowing vs Capital Expenditure :
The Government of Andhra Pradesh borrowed ₹87,773 crore in 2024-25 i.e 16.1% more compared to the previous year, reflecting increased dependence on external financing. Ideally, borrowed funds should be utilised to finance long-term productive capital assets while revenue receipts are utilised for servicing debt interest and principal repayments.
However, only 24% of the borrowing, i.e., ₹21,173 crore (including loan and advance disbursements), was spent on capital expenditure. The actual Capital Expenditure during 2024-25 amounted to ₹16,141 crore, less than the Budget Estimates (₹45,382 crore) by ₹29,241 crore. Actual Capital Expenditure spent accounts for 1% of the GSDP (₹16,06,109 crore) less than the budget estimate of ₹45,382 crore, much lower than the previous year, indicating a reduced emphasis on long-term asset creation.
“The persistent shift from capital to revenue expenditure, coupled with growing reliance on borrowings even for day-to-day requirements, raises serious concerns regarding fiscal discipline and long-term financial sustainability “, the CAG report said.
Cash Management Concerns:
During 2024-25, the Government of Andhra Pradesh borrowed short-term loans from RBI for the amount ₹1,72,532 crores, of which ₹42,004 crores was availed through Special Drawing Facility for 71 days and paid ₹188.82 crore asinterest, ₹73,897 crore 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 (₹1.94 crore) was maintained by the Government of Andhra Pradesh with the Reserve Bank of India for only eight (08) days without availing any WMA from RBI “, the CAG report said.
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