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Andhra’s Budget Deficit Misinterpretation

Andhra’s Budget Deficit Misinterpretation
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Highlights

Andhra’s Budget Deficit Misinterpretation. Before demerger of state, Andhras were saying that if A.P. was divided, Telangana will not survive as a state, alleging that Telangana is dependent on Andhra for its economy. But it is proved wrong.

Before demerger of state, Andhras were saying that if A.P. was divided, Telangana will not survive as a state, alleging that Telangana is dependent on Andhra for its economy. But it is proved wrong. Actually Residual A.P. is on the receiving end. It is staring at a big deficit budget.TS has emerged as a state with a balanced revenue and expenditure and is presently comfortable in spending for the state’s administration and development. Whereas,the residual A.P.is reeling under deficit budget and resorting to overdraft from RBI and looking for special assistance from the center. The Finance commission has provided to adjust its deficit over a period of 5 years from 1915-16.The center also rustled up some 8 to10000 cr, special assistance. Yet A.P. is not happy. It is demandingfor making good the deficit at one go and for specialfinancial status.

It is, of course,between the Center and A.P. to settle for whatever financial assistance A.P. is eligible to get. ButA.P. raising the bogey of bifurcation of the state as the cause of their deficit and trying to give an impression that the TS is benefitted at the cost of Andhra is not true.If you go in to the history of merger of Andhra and Telangana we will come to know some hard realities.Andhra state inherited deficit budget from Madras in 1953.In 1956 at the time of merger Andhra state was suffering from deficit budget and financial instability. Whereas Telangana region has inherited surplus revenue. After mergerfrom 1956 to 2014, in united A.P. regularly, the expenditure in Andhra region was more than its own revenue.The surplus revenue of Telangana was diverted in to Andhra region to make good its deficit. Thus in effect Andhra region was in deficit budget regularly owing to its inherent financial mismatch, all the 58 years of united state.

It is alleged by Andhras that they have created alargerevenue base for Hyderabad and the lack of Hyderabad revenue is creating the deficit to them. Hyderabad city was providing lion’s share of revenue to the state both in Nizam's dominion, Hyderabad state and united A.P. It is not a surprise, as it is the same case with all the metropolitan city capitals like Madras, Bombay, Calcutta and Bangalore. The peculiarity of united A.P. is that the per capita revenue in Telangana was much more than that of Andhra. The Dhar commission 1945-48; State reorganization Commission(SRC) 1955-56; Kumar Lalith commission 1956 to 68; Rosaiah’s statement in the Assembly for 2003-2007;budgets of both the states for 2014-15; 14th Financial commission projections for 2015-2020 --- all theirestimations/findings will vouchsafe the fact.The percapita revenue excessof Telangana was ranging from 38.94 to 106.21% over Andhra.

The case of Andhra and Telangana was different from other states reorganization in 1956. Andhra was suffering from deficit finance and did not have a worthwhile capital city,whatever ostensible reasons were proferred, Andhra, wanted to get merged with Telangana primarily for its revenue surplus and first class city capital of Hyderabad. In all the 58 years, the Telangana region was revenue surplus and Hyderabad, was contributing more revenue to state like before.Andhras were in the merged state only for 58 years. Whereasthey were in Madras state for more than 150 years with around 30% population in Madras city. Likewise Gujaratis were in Bomaby for a few centuries.The new Andhra and Gujarat states could not get their old capitals of Madras and Bombay respectively. There was no contention for the revenue of the capital there. In such a caseAndhras claiming that they are the reason for large revenue of Hyderabad in just 58 years is an absurdity and not true. Hyderabad is 400 years old and was 4th largest city in India in 1950s.

Let us now examine for veracity, the available statistics in the matter.The following table (source: Goutham Pingle, New Indian express) shows the excess of per capita revenue of Telangana over Andhra since 1945, including the projections for 2015-16 to 2019-20 by FC.It ranges from 38.94 to 106.21%. Even if we take the figures of 14th Finance Commission projections for the period from 2015-16 to 2019-20 based on the statistics and financial history of the united state in the past it comes to 38.94%.

If we peruse the Financial Commission statements related to A.P. and TS for the 5 years from 2015-16 to 1019-20 ,we will understand the following. The pre- devolution revenue of the 5 year period of A.P. is 78815 cr and TS is 78251 cr on an average per year. Though the population as per 2011 census is 4.94 cr for Andhra and 3.53 cr for TS, the revenue is almost equal. But there is a big variance in the expenditure. The average expenditure for Andhra is 117375 cr and for TS it is 73856 cr only. It indicates 48.92% more expenditure in Andhra. The average deficit for Andhra is 38360 cr. per year where as TS earns surplus for all the 5 years with an average surplus of 4394 cr.

In per capita terms the expenditure in Andhra is 118800 as against the revenue of 79772 per person. In TS inevitably the expenditure is less than the revenue per person. The average deficit of 38,360 cr per year is entirely on account of Andhra,as TS has a 4394 cr. surplus. It clearly indicates that the entire deficit is due to excessive expenditure in Andhra, diverting revenue from Telangana region.

In such circumstances holding bifurcation as the reason for their deficit is absolutely wrong.The argument has no merit whatsoever. The bifurcation did not do any injustice to Andhra. It has only brought out the stark financial status of Andhra region in juxtaposition with Telangana.On the other, it has paved the way for the enjoyment of its full revenue by Telangana.Itcan,be construed as apoetic justice, after 58 years of struggle.In a way it is also pyrrhic because of humongous loss of revenue in earlier years.

If the exploitation of Telangana revenue is stopped, it cannot becomean injustice to Andhra.Telangana was against the merger in the beginning itself. It was protesting time and again on the use of surplus revenue from Telangana.In 1970 in the aftermath of 1969 agitation it was estimated by Kumar LalithCommission, thatfrom 1956 to 1968 at least 65 cry surplus revenue of Telangana is spent in Andhra region. And it was agreed to spend that amount in Telangana in the subsequent years to make good the loss and also not to spend surplus Telangana revenue any morein Andhra. The agreements were never implemented, like many such agreements,and continued the spending of Telangana revenue in Andhra without any qualms. Thus they were used to depend on Telangana revenue in Andhra for all the 58 years creating a permanent deficit budget in Andhra region.

Now because of the bifurcation of accounts of residual A.P. and TS by the 14th Finance Commission the truth of the matter is brought out so succinctly. The present difference of availabilityof funds to the two states also explains the situation very clearly. In such a scenario, it is ridiculous for Andhras to blame bifurcation and Telangana for their lack of revenue and budget deficit. They have got in to this unenviable situation because of their misdemeanor of using Telangana revenue continuously for all the 58 years of the united state, despite opposition to it.

Thus, their deficit budget is thelegacyof their past and their profligate use of Telangana revenue. The responsibility is theirs entirely. Ironically, ittranslates tothe saying ‘ulta chor, kotwal ko dantna’, if they are trying to blame TS for their impropriety.

By J R Janumpalli

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