Why Chandrababu Naidu’s poll promises pose a challenge to Andhra’s fiscal math

An uphill task now awaits TDP chief N Chandrababu Naidu, who took oath as Chief Minister of Andhra Pradesh on Wednesday. Sources in the Central government said while a Special Category Status may not be forthcoming since it will trigger similar demand from other states, the finance ministry may consider special packages including more Central funds for some of the big projects such as the Amaravati capital city project.

The TDP promised welfare schemes – dubbed Babu Super Six – in the run-up to the polls which include free bus travel for women, three free LPG cylinders per year for all households under the Deepam Scheme, an annual dole of Rs 18,000 for every woman above the age of 18, an yearly allowance of Rs 15,000 per year for children under the “Talliki Vandanam (Salute to the Mother)” scheme, Rs 3,000 per year for unemployed youth and free clean drinking water supply to households.

The exact estimates of how much each of the schemes under “Super Six” is going to burden the Naidu government is yet to be ascertained, sources said. But cumulatively, Naidu’s poll promises could add up to as much as Rs 60,000 crore a year, they said.

Before he begins tackling the financial challenges, Naidu will require Rs 4,500 crore to disburse social pensions to about 65 lakh beneficiaries by July 1 apart from the Rs 6,000 crore required for salaries of government servants.

According to the state’s vote-on-account budget for 2024-2025, the total revenue receipts are estimated at Rs 2,05,352.19 crore while the expenditure was pegged at Rs 2,30,110.41 crore.

A former state administrative officer told The Indian Express that Naidu has a tall order to achieve given the financial situation of the state. Another senior officer said the state’s debt burden could be much higher if off-Budget borrowings and debt of the public sector is also included.

“The state was facing a fiscal disaster as bad financial practices like raising the debt on state-run enterprises were adopted by the YSRCP government. A granular analysis of the debt burden is the need of the hour,” he said.

Apart from the welfare scheme-related expenditure, the development of Amaravati, which Naidu announced almost immediately after the election result, is likely to also financially burden the state. “Developing a capital is an expensive affair and costs have almost doubled since 2019, when construction was halted after the YSRCP came to power,” a retired IAS officer said. Jagan had abruptly scrapped Naidu’s plan to develop Amaravati as the capital and floated his own three-capital proposal, which is entangled in a legal battle currently, citing “decentralised governance”.

The TDP, however, hopes that the Centre would come to its rescue. “Despite such a huge victory and being a key constituent of the NDA at the Centre, we did not demand anything except support for Andhra Pradesh. Also, we will generate additional wealth by bringing in investment into the state,” TDP national spokesperson Pattabhi Ram Kommareddy told The Indian Express.

However, a civil servant said it would be interesting to see how the state manages to generate revenue without increasing taxes. “Centrally-sponsored schemes could go a long way in helping the state,” he said.