The twin engines: 2024-25 economic divergence in AP and Telangana

A significant common challenge for both states is the rising public debt, though the intensity of the burden differs. Andhra Pradesh carries a heavier fiscal load. Its total outstanding debt is projected to reach approximately `5,64,488 crore by the end of 2024-25 (Revised Estimates). Telangana’s fiscal health, while superior to its neighbour, is also under scrutiny due to the rapid accumulation of liabilities. The state’s public debt is projected to cross `5 lakh crore by the end of 2025-26.

A decade after the bifurcation of the unified state of Andhra Pradesh, the two successor states—Telangana and Andhra Pradesh—have etched distinct economic identities. While the former, anchored by the cosmopolitan hub of Hyderabad, has cemented its status as a services powerhouse, Andhra Pradesh has strategically leveraged its coastal resources and focused on rejuvenating its agricultural and industrial base. The latest economic indicators for the fiscal year 2024-25 reveal a tale of two economies, both striving for growth but facing unique structural and fiscal challenges.

Growth trajectories and economic size:

Both states remain pivotal to India’s southern economic landscape. As per the latest official estimates, Andhra Pradesh’s economic engine appears robust and accelerating. Its Gross State Domestic Product (GSDP) at current prices is projected to be around ₹16.06 lakh crore for 2024-25 (advance estimates). Crucially, the growth rate at constant (2011-12) prices is estimated to have jumped significantly to 9.24 per cent in 2024-25, a 6.18 per cent rise over in the previous fiscal year.

This indicates a strong rebound in real economic activity. In contrast, Telangana continues its high-growth trajectory, leveraging its robust services base. While the final 2024-25 figures are still developing, the state registered an impressive GSDP of approximately ₹14.64 lakh crore (at current prices) in 2023-24, with a current prices growth rate exceeding 14.2 per cent, ranking among the fastest-growing major states in the country.

Andhra Pradesh currently holds a marginally larger nominal GSDP, while Telangana maintains a stronger average growth rate, demonstrating the economic momentum generated by its focus on urban centers and high-value sectors.

Sectoral dominance: services vs. agriculture:

The fundamental difference between the two economies lies in their primary drivers, reflected in the Gross State Value Added (GSVA) composition:

1. Telangana-The services hub:

Telangana’s economy is heavily skewed towards the Services sector, which contributed a massive 65.7% to the state’s GSVA in the 2023-24 advance estimates. This dominance is driven almost entirely by the rapid expansion of Information Technology (IT), IT-Enabled Services (ITES), pharmaceuticals, and financial services concentrated around Hyderabad.

The Industrial sector contributed around 18.5%, with Agriculture and Allied sectors making up the remaining 15.8%. This structure gives Telangana high economic efficiency and resilience but also makes it highly dependent on global service demand and its capital city.

2. Andhra Pradesh-The agrarian base:

Andhra Pradesh presents a more balanced, albeit traditional, economic structure. The state is a major agricultural and aquaculture powerhouse. For 2024-25, the agriculture and allied sector is projected for a robust growth of 10.70 per cent (constant prices), making it a crucial source of growth.

The services sector is also growing strongly, estimated at 8.53 pr cent growth, while the industry sector is expected to grow at 6.58 per cent. AP’s strength in food processing, fisheries (being the country’s largest shrimp producer), and horticulture provides a broad base but often leads to lower productivity and higher vulnerability to climatic shocks compared to a purely service-based economy.

PCI and standard of living:

The sectoral divergence directly impacts the living standards of the residents, clearly favoring the state with greater services density.

Telangana boasts a significantly higher Per Capita Income (PCI), estimated at approximately ₹3,47,299 for 2023-24. This figure is way above the national average and reflects the high-paying jobs generated by the IT and pharma industries.

Andhra Pradesh, while showing strong improvement, has a lower estimated PCI of ₹2,68,653 for 2024-25. Although this is also higher than the national average, the difference of nearly ₹79,000 compared to Telangana highlights a structural gap in economic opportunities and wealth creation, largely stemming from its reliance on lower-value primary sectors.

Fiscal health: The debt burden:

A significant common challenge for both states is the rising public debt, though the intensity of the burden differs. Andhra Pradesh carries a heavier fiscal load. Its total outstanding debt is projected to reach approximately ₹5,64,488 crore by the end of 2024-25 (Revised Estimates). Crucially, the state’s Debt-to-GSDP ratio is estimated at a high 35.15% for the same period.

This high ratio is a source of concern, as it limits the government’s ability to undertake large-scale capital expenditure, with a substantial portion of revenue receipts being diverted towards interest payments.

Telangana’s fiscal health, while superior to its neighbour, is also under scrutiny due to the rapid accumulation of liabilities. The state’s public debt is projected to cross ₹5 lakh crore by the end of 2025-26. However, its Debt-to-GSDP ratio remains fiscally healthier, estimated at approximately 28.1% of GSDP for the 2025-26 budget estimates.

The challenge for Telangana’s new government is balancing massive new welfare spending commitments with fiscal prudence and ensuring that borrowed funds are directed towards asset creation rather than pure consumption.

Outlook:

The economic journey of Andhra Pradesh and Telangana showcases two successful, yet contrasting, models of development. Telangana, the “Deccan Tiger,” thrives on its established services ecosystem, delivering high PCI but facing the political imperative of expanding development beyond Hyderabad and managing its debt growth.

Andhra Pradesh, the “Coastal Growth Engine,” is leaning on its agrarian and industrial potential, achieving commendable real growth, particularly in its primary sector, but burdened by a higher debt-to-GSDP ratio and the persistent need to increase high-value manufacturing and service jobs to boost its PCI. For both states, the next few critical years will hinge on fiscal discipline, improving the ease of doing business to attract capital investment, and channeling resources into capital expenditure—the investments that drive long-term, sustainable growth rather than simply increasing consumption.

(The writer is a former OSD to former Union Civil Aviation Minister)