Telangana govt slashes FY20 budget citing slowdown impact on state finances

Telangana has reduced budgetary expenditure for 2019-20 by nearly 20 per cent, to Rs 1.46 trillion as compared to the Rs 1.82 trillion it had asked for in March, in the Vote-on-Account prior to the state assembly election. 

Presenting a full Budget for FY20 (officially from April 1) in the legislative assembly, Chief Minister K Chandrasekhara Rao said this was done as the country’s economic slowdown had impacted state finances in great measure.

This takes the size of the annual Telangana Budget back by two years. In FY18, the state announced Rs 1.49 trillion as the estimated spending; it later incurred a total expenditure of Rs 1.43 trillion. Earlier, Rao had said his aim was to mobilise Rs 2 trillion every year during this second stint (his government was re-elected this year).

As a consequence, the government has directed all departments to first clear pending bills before taking on new work. Expenditure on all major projects would have to be met from resources to be raised outside the budget framework, the CM stated. However, Rao vowed to continue all welfare programmes for the poor and farmers — social security pensions, the Rytu Bandhu scheme, free power and crop loan waiver up to Rs 100,000, among others. 

The government has allocated around Rs 9,000 crore for social security pensions, Rs 12,000 crore for Rytu Bandhu and Rs 6,000 crore for farm loan waivers in the first instalment. Besides making significant provision for other flagship welfare programmes.

The CM said the state does not need the Centre's goods and services tax compensation untill now. It had to take Rs 175 crore in April-May and a further Rs 700 crore in June-July on this head. 

"The compensation taken during June and July was four times more than in April-May and this alone reflects the steep deterioration in the financial situation," Rao said.

In line with this, the estimated tax revenue of Rs 69,329 crore in the full budget is only 3.9 per cent higher than the Rs 66,750 crore (revised estimate) in 2018-19. During the first quarter (April-June), tax revenue growth was close to 5.5 per cent, against the earlier anticipation of 15 per cent growth. Revenue from the stamps and registrations department was an exception to the rule of a decline across heads, showing 17.5 per cent growth in collection during the first four months of the financial year -- the rise in the earlier financial year was 19.8 per cent.

Non-tax revenue fell by 14.2 per cent in the first four months. Yet, in the latest budget, the government has steeply raised the target on this head to Rs 15,875 crore as compared to Rs 9,960 crore in the Vote-on-Account. Rao said additional money would come by sale of government land. 

The state has slashed the estimated grants-in-aid from the Centre by almost two-third, to Rs 8,177 crore as compared to the Rs 22,835 crore in the Vote-on-Account. While keeping the share of central taxes more or less the same at Rs 19,718 crore. 

The budget estimates a revenue surplus of Rs 2,044 crore and an overall fiscal deficit of Rs 24,081 crore. The revenue expenditure of Rs 1.11 trillion includes interest payment of Rs 14,574 crore on loans. The capital expenditure of Rs 17,274 crore includes public debt payment of Rs 6,411 crore. 

The cumulative public debt is Rs 2.05 trillion, almost 21.5 per cent of the Gross State Domestic Product. In addition, government guarantees stood at Rs 77,314 crore as on end-March.