No panacea for ‘Special’ Andhra Pradesh
The memories of the forceful dismemberment of the state are still fresh on the people of Andhra Pradesh, and all the political parties projected the ‘Special Status’ promised in the Parliament as a panacea to address the disadvantages faced by the state. The people are disappointed with the BJP’s proposed ‘Special Package’ that is designed as an alternative better than the ‘Special Status’. The larger question remains, whether the ‘Special Status’ or ‘Special Package’ is useful to the state.
In an exclusive interview to ABN Andhra Jyothy, Arun Jaitley said “the sentiment on special status will not lead to development, but the investments, resources, grants and monies will lead to development”. He further added, “in the last 27 months, the current dispensation has done more to the thirteen districts of Andhra Pradesh than the in the previous two dispensations under the Congress regime”. As his statements completely rule out the ‘Special Status’, and now changing the discourse towards ‘Special Package’ is very difficult. The highly charged public emotions are up for exploitation. Instead, a debate on understanding the outcomes of ‘Special Package’, and demanding more benefits will help the state in the long-term.
The Union Ministers in the Modi’s Cabinet made few statements in the last few days on providing assistance to Andhra Pradesh were soothing, and they rightly termed Andhra Pradesh as a newly formed state, and the carving out Telangana was an act of historic injustice to Andhra Pradesh. During the debate in Rajya Sabha, on special status to Andhra Pradesh, Arun Jaitley, the Finance Minister raised three issues bothering the state. First — Andhra Pradesh is identified as a revenue deficit state, second — the lack of industrialisation in the state, and third — the need for rapid urbanisation.
The Union government has rightly identified the problems. Let us understand each of these issues before drawing any conclusions.
Revenue deficit and the burden of debt
Last week, Mr. Ramakrishnudu, the AP Finance Minister, said “While the State is already staring at a revenue deficit of Rs.3,000 crore by the end of the first quarter, the financial woes have compounded further with delay in the release of fiscal deficit (Rs.14,000 crore) by the Centre for 2014–2015”. A quarterly ₹3,000 crore revenue deficit is ₹12,000 crores annually.
Soon after the bifurcation, a white paper on state finances noted “Andhra Pradesh has forfeited major economic assets and inherited massive liability without having the wherewithal to service the debt”. Subsequently, as on FY 2016, the total debt of the state stood at ₹1,79,140 crores and is projected to be ₹3,02,957 crores by FY 2021. Further, the state’s debt is 27.88% of GSDP against prescribed norm of 25% and the interest payments on loans crossed the 10% of GSDP limit.
The rapidly increasing revenue deficit is compounded by the piling burden of debt. The need of the hour is putting the state in the higher growth trajectory and creating more sources of revenues within the next five years. The other option is to retrench the welfare programmes, and government’s expenditure — both are unlikely to happen.
Industrialisation
According to the data available on the Ministry of Corporate Affairs, Andhra Pradesh with 12,962 incorporated companies is the second lowest industrialised states when compared to the neighbouring states — Telangana has 50,634, Karnataka has 52,545, Tamil Nadu has 68,057 and Odisha has 11,737 incorporated companies. Around 200 companies per month are being incorporated in Andhra Pradesh. Though encouraging, this number is way below par when compared to the neighbouring states.
Urbanisation and the Capital construction
The current population of the Amaravathi capital region is 5.8 million, and estimated to increase to 13.5 million by 2050. The employees of GoAP have started relocating to the temporary arrangements in the capital region of Amaravathi, and all the departments are not fully functional from the capital. Other than government employees, attracting the industries, creating job opportunities, and encouraging people to migrate to the capital region remains a challenge.
Funding the infrastructure for capital and industries
The low levels of urbanisation and poor infrastructure in the Seemandhra region requires more funds under capital expenditure to finance the infrastructure needs to build the capital and develop the industrial base. An estimated ₹27,097 crores are required to build Amaravathi, the capital. In 2014, the Government of Andhra Pradesh (GoAP) requested both the Fourteenth Finance Commission and the Union Finance Ministry to relax the Fiscal Responsibility and Budget Management Act (FRBM) borrowings to 7%. The same request was made desperately again in July 2016. While Telangana got the permission from the Union, the request of Andhra Pradesh was declined citing the guidelines of the Fourteenth Finance Commission. Finally, Andhra Pradesh has decided to amend the FRMB Act in the state assembly to increase the borrowings limit to 3.5%, and is yet to take shape. Since 2014, the GoAP is confronting challenges to acquire finances to build the capital and to take up several infrastructure projects in the state.
The continuing revenue deficit and low capital expenditure followed by the constraints stemming from FRMB Act and 14th Financial Commission have been frustrating to the state. The financial outlook of the state is not promising, and the debt trap looks inevitable.
At this stage, it is unclear on how the Union is planning to help the state to address the financial issues, and boost the urbanisation and industrialisation in the state. One consideration is providing the grants through Externally Aided Projects (EAP). These grants are a temporary relief on the capital expenditure and the other infrastructure needs of the state, and may not be useful in the long-term if the rapid industrialisation and urbanisation does not take place.
Considering the challenges ahead, it is unlikely that either ‘Special Status’ or ‘Special Package’ will help Andhra Pradesh to achieve parity with the neighbouring and competing states in the country. It is hard to digest, but the truth is no panacea exists to solve the problems faced by Andhra Pradesh.
The Union Minister Venkaiah Naidu said “the Union’s support to Andhra Pradesh is continuous, and not time bound”. Hope the outcomes of the proposed ‘Special Package’ are annually reviewed, and the necessary actions are taken to improve the economic, industrial and financial status of Andhra Pradesh.
