Debt, freebies and fiscal stress: AP, TG at financial crossroads
Andhra Pradesh and Telangana, born from one united state in 2014, are now facing big money worries in the current financial year (April to November 2025). Reports by the global credit rating agencies studying 22 states show both have already spent almost all their allowed borrowing limit - Andhra 95.7 per cent and Telangana over 100 per cent (107.5 per cent) - while income growth slows and big project spending jumps. This puts jobs, prices, and daily life at risk for everyone from Hyderabad office workers to Visakhapatnam fish sellers.
In all, the 22 states, whose data is available for the period April-November 2025, together account for some 94 per cent of the country’s GDP. Data shows slow tax income (9.2 per cent vs last year’s 17 per cent) mainly due to weak GST sales tax collections.
Apart from the two Telugu states, the fiscal trajectory of a few other states that look worrisome include Himachal Pradesh (exhausted 72.1 per cent of the budgeted fiscal deficit in eight months of FY26 against 67.2 per cent in the same period of FY25) and Kerala (86.2 per cent compared to 64.3 per cent in the previous fiscal).
How Telangana is managing its money
In the first eight months, Telangana spent a lot more on big projects like roads and buildings - up 73.8 per cent from last year - with nearly 10 per cent of all such spending across 22 states. This helps grow the city economy, pharma factories (making 1 in 4 Indian medicines), and new urban areas. But day-to-day spending rose very little, just 0.4 per cent, because salaries grew slowly (2.4 per cent) while loan interest payments jumped 9.2 per cent from old debts.
Income from taxes grew 9.2 per cent, thanks to liquor taxes (up 10.3 per cent) and property sales fees (up 9.5 per cent). But GST (sales tax) barely grew 5.2 per cent due to some one-time government adjustments cutting collections by Rs23,000 crore in April. Mining money helps but swings wildly.
The real danger sign? Telangana already crossed its full yearly borrowing limit, up from 77 per cent last year, largely due to free bus rides for women under the Mahalakshmi scheme. The IT sector grows at 12 per cent, but endless free schemes threaten the state’s overall growth target of 8-9 per cent.
How Andhra Pradesh is Managing Its Money
Andhra Pradesh also boosted big project spending hugely- up 103 per cent, with about 5 per cent share among states- focusing on Polavaram dam for farms and rebuilding Amaravati capital. Day-to-day costs rose a bit more than in Telangana, 1.4 per cent, as subsidies fell 14.5 per cent, but loan interests keep rising, trapping the state in debt from job promises (Super 6) and big plans.
GST growth hurt here too at 5.2 per cent, missing budget targets (only 60 per cent collected), though other taxes helped a little. Borrowing use at 95.7 per cent (same as last year) shows free electricity and pensions eating money without enough new income. Good signs include a busier Visakhapatnam port, but waiting too much on central government aid slows factory growth.
Side-by-Side Look at Both States
Both face slow GST income and project spending jumps from last year’s lows, but differ in key ways. Telangana spends more overall on projects (10 per cent share vs Andhra’s 5 per cent) and spreads income better via liquor/property taxes, while Andhra grows faster in raw numbers (103 per cent) but depends more on basic taxes. Telangana’s daily spending grows more slowly (0.4 per cent vs 1.4 per cent), but it has already crossed its borrowing limit (107.5 per cent vs 95.7 per cent). City jobs/mining power Telangana; farms/ports drive Andhra. Both risk “freebie overload,” with project money used at 38 per cent so far. Across 22 states, loans rose 17.8 per cent to Rs7.5 lakh crore, pushing both toward last year’s high debt levels (3.5 per cent of state income).
The Real Problem: Free Gifts Emptying Pockets
Free bus rides in Telangana and free electricity in Andhra used up all the borrowing money early, just like Kerala and Himachal Pradesh. Total state income across these states grew only 7 per cent due to GST collection hiccups, though other small gains provided some balance. If project spending accelerates later in the year as usual, both states risk breaking their 3 per cent borrowing limits. Common people suffer the consequences: petrol prices rise, government salaries get delayed, and roads remain full of potholes despite all the announced spending.
Telangana’s IT sector grows at 12 per cent, and Andhra’s ports handle 15 per cent more cargo- these proven strengths need money and attention, not endless freebie schemes that deliver little real benefit.
Practical Fixes That Actually Work
Both states should focus on earning from their existing strengths without new taxes. Telangana can sell small plots for pharma factories around Hyderabad to raise Rs10,000 crore and add direct flights to Singapore to boost IT exports by another Rs5,000 crore. Andhra should complete crane installations at Vizag port, already handling 15 per cent more cargo, to earn Rs8,000 crore from shipping and restart fish and prawn exports from the Krishna coast for Rs3,000 crore more. Together, they can create tourist circuits connecting Tirupati temples to Hyderabad forts for an additional Rs5,000 crore from longer visitor stays.
Spending needs discipline through a simple 60-40 rule: cap daily expenses at 60 per cent of the budget and pour 40 per cent into projects like roads, ports, and dams. Telangana should cut fake names from subsidy lists using Aadhaar cards and redirect Rs5,000 crore from the struggling free bus scheme to complete Hyderabad Metro Phase 3, connecting 20 lakh people to jobs. Andhra should save Rs4,000 crore from power subsidies and spend it on Polavaram dam turbines to water a few more lakh acres for farmers. Both states should send all help money directly to bank accounts, eliminating middlemen theft for immediate impact.
Debt control requires considering a strategy of selling assets rather than borrowing more. Both states should look at selling Rs40,000 crore worth of empty lands - Amaravati plots in Andhra and unused Hyderabad buildings in Telangana. They should replace expensive 10 per cent loans with cheaper 7 per cent loans through national banks and claim the full Rs26,000 crore available from the Centre’s special capex project fund, of which only Rs5,000 crore has been released so far.
Smart Cooperation Without Forced Handshakes
Forget joint summits or water deals - these two states barely talk. Instead, each should independently leverage the other’s strengths through practical, no-strings steps that benefit business without political drama.
Telangana: Invite Andhra pharma buyers to Genome Valley (already exporting Rs50,000 crore). Market Hyderabad as “Vizag Gateway” with daily cargo flights - Rs5,000 crore logistics boost. Target a $250 billion size by 2032.
Andhra Pradesh: Pitch Vizag port to Hyderabad IT firms needing data centre imports (15 per cent cargo growth already). Launch “Telangana Trade Express” freight service - Rs4,000 crore earnings. Aim for the same $250 billion target.
Freebies cost both states in the 2023 elections. Delivering real results wins 2028. Telangana grows its IT strength; Andhra delivers farm water. The choice is simple: work over free gifts for lasting prosperity. History rewards builders, not distributors.
(The author is with Cholleti BlackRobe Chambers, Hyderabad)
