Hyderabad: As Telangana grapples with mounting debt concerns ahead of its budget presentation, a key issue is the significant shortfall between budget estimates and actual revenue. Between 2015-16 and 2022-23, Telangana has experienced a substantial gap between forecasted and realised revenue, with the state showing one of the largest discrepancies in the country, along with Andhra Pradesh.
On average, Telangana has collected 21% less revenue than what was proposed during the budget presentations. Additionally, the state spent 17% less than initially budgeted during this period.
A state budget consists of three primary financial figures: Budget estimates, revised estimates, and actuals. Budget estimates project expected financial resources and expenditures for the year. Revised estimates reflect adjustments based on actual financial transactions during the year, offering a more accurate picture of the fiscal situation. Actuals represent the final audited financial figures for the year.
Actual realisation
The comparison of these figures helps identify discrepancies and is crucial in evaluating the reliability and credibility of the proposed budget. For example, in the 2023 budget, the original revenue projection was Rs 2.45 lakh crore, but the actual realisation at the end of the year was only Rs 1.92 lakh crore—a 21% shortfall.
To address such revenue shortfalls, states often need to borrow additional funds. However, borrowing capacity is limited by the state’s Fiscal Responsibility and Budget Management laws and annual borrowing limits set by the central govt. If borrowing alone isn’t enough to cover the shortfall, the state may be forced to reduce its expenditures.
A clear link exists between budget shortfalls and underspending. Telangana, for example, with a 21% shortfall in revenue between 2015-16 and 2022-23, also underspent 17% of the budget. This is significantly higher than the national average, where states typically underspend by around 10%.
Fund crunch
A major factor contributing to this fiscal strain is the burden of committed expenditures, which include salaries, pensions, and interest payments. These are fixed costs that cannot easily be reduced in the short term. As a result, a large portion of the budget is allocated to these expenditures, limiting the funds available for other development activities.
In 2024-25, states have budgeted to spend 27% of their revenue receipts on salaries, 13% on pensions, and 12% on interest payments, further constraining the fiscal flexibility available for growth and infrastructure.
As Telangana navigates these fiscal challenges, experts say balancing borrowing, spending, and committed expenditures will be crucial in managing its growing budget shortfall and debt burden.
On average, Telangana has collected 21% less revenue than what was proposed during the budget presentations. Additionally, the state spent 17% less than initially budgeted during this period.
A state budget consists of three primary financial figures: Budget estimates, revised estimates, and actuals. Budget estimates project expected financial resources and expenditures for the year. Revised estimates reflect adjustments based on actual financial transactions during the year, offering a more accurate picture of the fiscal situation. Actuals represent the final audited financial figures for the year.
Actual realisation
The comparison of these figures helps identify discrepancies and is crucial in evaluating the reliability and credibility of the proposed budget. For example, in the 2023 budget, the original revenue projection was Rs 2.45 lakh crore, but the actual realisation at the end of the year was only Rs 1.92 lakh crore—a 21% shortfall.
To address such revenue shortfalls, states often need to borrow additional funds. However, borrowing capacity is limited by the state’s Fiscal Responsibility and Budget Management laws and annual borrowing limits set by the central govt. If borrowing alone isn’t enough to cover the shortfall, the state may be forced to reduce its expenditures.
A clear link exists between budget shortfalls and underspending. Telangana, for example, with a 21% shortfall in revenue between 2015-16 and 2022-23, also underspent 17% of the budget. This is significantly higher than the national average, where states typically underspend by around 10%.
Fund crunch
A major factor contributing to this fiscal strain is the burden of committed expenditures, which include salaries, pensions, and interest payments. These are fixed costs that cannot easily be reduced in the short term. As a result, a large portion of the budget is allocated to these expenditures, limiting the funds available for other development activities.
In 2024-25, states have budgeted to spend 27% of their revenue receipts on salaries, 13% on pensions, and 12% on interest payments, further constraining the fiscal flexibility available for growth and infrastructure.
As Telangana navigates these fiscal challenges, experts say balancing borrowing, spending, and committed expenditures will be crucial in managing its growing budget shortfall and debt burden.
