A.P.'s financial agony

ONE CLEAR MESSAGE from the Andhra Pradesh Budget is that state finances are under severe strain. Coming as it did after a string of strategy papers by the Government, the Budget presented by the Andhra Pradesh Finance Minister, Mr. Y. Ramakrishnudu, involves a lot of plainspeak. Especially in admitting to a resource crunch faced by the Government, the Finance Minister portrayed the ``stark reality'' which is now set to become a fixed feature of State Budgets, not just of Andhra Pradesh, with every passing year - that of a widening mismatch between revenues and expenditures. An increasing constriction of the ability to raise more revenues seen together with additional expenditure burdens has pushed Andhra Pradesh to borrow from the Union Government, other financial institutions and the market to finance its Plan outlay of Rs. 8,991 crores, which includes, among others, capital expenditure of Rs. 3,802 crores and a cash subsidy of Rs. 1,626 crores for power sector restructuring. Rather less pronounced are the State's constraints to raise more taxes. Rather, the problem is on the expenditure side, and more specifically Plan expenditure. Though the outgo on account of salaries has increased drastically since the mid-1980s from Rs. 1,080 crores to an estimated Rs. 8,786 crores for the year 1999-2000, the real financial agony is from the additional burden of having to meet Plan expenditure.

Rather than remain an incremental exercise which the latest Andhra Pradesh Budget to a large extent is, the overall health of the State's finances would have improved considerably if hard decisions were taken - cutting down, or even holding back, Plan expenditures till the financial health is improved, for instance. With sharper prioritisation and re-deployment of resources, Mr. Ramakrishnudu could have devoted some attention to the possibilities of pruning of the Plan in the face of the severe resources crunch. Though politically difficult, the least such a thinking would have done was to have placed the important issue for a larger debate. On yet another front, as Andhra Pradesh seeks its place under the sun in a globalised economy, and given the substantive extent of external aid that it receives, deft management of its policies is called for. In authorising Government departments to levy user-charges, Andhra Pradesh had taken a much-delayed, but welcome, first step last November. It is time now to commence a serious and transparent appraisal of the system, as it comes at a time when there is an increasing demand for such shifts in economic management. Details of the initial response and the early outcomes of this exercise, if included, would have made a significant qualitative addition to Mr. Ramakrishnudu's Budget.

Maintaining its average rate of economic growth of 5.3 per cent a year would not pose much of a problem for Andhra Pradesh. However, notwithstanding its advances in the services sector, which grew at 9.5 per cent during 1999-2000, the Government would do well to take note of the declining rate in the growth of agriculture. That the reasons for this trend have not been elaborated upon but have been couched in policy statements of intent is worrisome. Especially given the predominantly agriculture-dependent nature of the economy. More so when the White Paper on Fiscal Reforms Strategy concedes that the State's agriculture sector registered a negative growth rate during 1999- 2000 (-3 per cent), after a huge growth rate (23.7 per cent) in 1998-99. The Government's steps towards e-governance and providing Internet connectivity to villages, though extremely far-sighted, should not result only in islands of prosperity. Appropriate economic strategies encompassing the wide disparities are required to attain the Chief Minister, Mr. Chandrababu Naidu's dream of a `Swarna' Andhra Pradesh.

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