Slower revenue growth, weak Central transfers and rising borrowings add to fiscal pressure
(AP News – Amaravati)
The Andhra Pradesh Government’s fiscal position has come under renewed scrutiny after the State’s June 2026 Monthly Accounts revealed that the Revenue Deficit (RD) has already exceeded the entire annual Budget Estimate within the first three months of the 2026–27 financial year. By the end of June, the Revenue Deficit stood at ₹23,663.29 crore, against the annual Budget Estimate of ₹22,002.50 crore, reaching 107.55% of the full-year target.
The first-quarter accounts indicate that the sharp deterioration is not attributable to a single factor. Revenue mobilisation has lagged behind the progress of the financial year, Central transfers have remained below expected levels, and borrowings have increased much faster than capital expenditure. At the same time, committed expenditure on salaries, pensions, interest payments and subsidies has continued to place sustained pressure on the State’s finances.
Unusual Situation
Revenue Deficit represents the excess of Revenue Expenditure over Revenue Receipts. A sustained Revenue Deficit implies that the Government is borrowing to finance its routine expenditure instead of limiting borrowings primarily to capital asset creation.
The June accounts present an unusual situation. Although only one-fourth of the financial year had elapsed, the Revenue Deficit had already crossed the Budget Estimate for the entire year.
The figures show that while Revenue Receipts have reached only 16.87% of the annual target, Revenue Expenditure has already reached 24.66%. The resulting mismatch has pushed the Revenue Deficit beyond the annual Budget provision within the first quarter itself.
Revenue Mobilisation Trails the Financial Year’s Progress
One-fourth of the financial year had been completed by the end of June. However, overall Revenue Receipts stood at only 16.87% of the Budget Estimate, while Tax Revenue reached 18.80%. Both remain below the pace of the financial year, indicating that revenue mobilisation has been weaker than required during the first quarter.
Among the major tax components, GST collections reached 21.54% of the annual target and Sales Tax 21.47%, whereas State Excise stood at 17.13%. These collections, although continuing to grow, have not been sufficient to keep pace with expenditure.
Weak Central Transfers Add to Revenue Pressure
Transfers from the Union Government have also progressed at a slower pace than the financial year.
By the end of the first quarter, the State’s share in Central Taxes had reached only 15.68% of the annual estimate, while Grants-in-Aid stood at just 6.82%. Although the timing of tax devolution and grants varies during the year, the June accounts indicate that Central transfers have remained below the pace of the financial year, adding further pressure to the State’s revenue position.
Borrowings Outpace Capital Expenditure
The June accounts also reveal a significant divergence between the pace of borrowings and capital investment.
Capital Receipts, which are overwhelmingly driven by borrowings, have already reached 44.29% of the annual Budget. In comparison, Capital Expenditure has reached only 16.61%.
This indicates that the pace of borrowings is substantially higher than the pace of capital asset creation. While borrowings are expected to finance infrastructure and other productive investments, the first-quarter figures suggest that fiscal resources are being mobilised much faster than they are being translated into capital expenditure.
Committed Expenditure Continues to Strain Finances
Recurring expenditure continued to expand during the first quarter, particularly under committed expenditure heads.
Pension expenditure had already reached 45.70% of the annual Budget Estimate by June, while subsidy expenditure stood at 35.35%. Interest payments accounted for 26.43%, and salaries and wages reached 24.54% of their respective annual allocations.
These categories constitute unavoidable expenditure and leave limited fiscal flexibility, especially when revenue growth remains below expectations.
Transparency Gaps Remain
The Monthly Accounts note that information relating to Government Guarantees and borrowings from the Public Account was awaited from the State Government and therefore could not be incorporated in the June publication. The absence of these details limits a complete assessment of the State’s fiscal liabilities and contingent risks.
Fiscal Outlook for The Remaining Year
The first-quarter figures point to a clear fiscal trend. The Revenue Deficit has already exceeded the annual Budget Estimate, revenue mobilisation has fallen behind the pace of the financial year, Central transfers have remained subdued, and borrowings have advanced much faster than capital expenditure. The State’s fiscal position during the remaining three quarters will depend on improvements in revenue collections, the flow of Central transfers, prudent expenditure management and the extent to which borrowings are converted into productive capital investment.
