State on tightrope walk in finalising budget proposals for 2025-26

State Finance department struggles to finalize budget amid revenue shortfall, mounting expenses, and limited resources for welfare schemes.

The Finance department is on a tightrope walk in finalising the budget estimates for the financial year 2025-26 as the State is a long way from realising the targets of revenue receipts set for the current fiscal.

The State has to make provisions for Rythu Bharosa involving close to ₹20,000 crore, subsidies, including free power to farm sector estimated around ₹15,000 crore, salaries and pensions and interest payment besides reimbursement of expenditure incurred on account of free bus travel to women. Though the government has ensured uninterrupted implementation of various welfare schemes, it is struggling hard to raise resources to strike a balance between committed expenditure and continuation of welfare schemes.

With little over a month remaining for the conclusion of the current fiscal, the State’s revenue receipts are not up to the expectations with overall revenue receipts reaching ₹1.82 lakh crore — 66.57% of ₹2.74 lakh crore of budget estimates. This includes borrowings of ₹58,586 crore, constituting almost one-third of the receipts.

Revenue through major heads like Goods and Services Tax (72.8%), Sales Tax (79.90%) and State Excise Duties (60.84%) and State’s share of Union taxes (83.42%) registered impressive figures till January end. However, accruals in the form of Non tax revenue at 16.66% — ₹5,866.4 crore of the ₹35,208.44 crore and grants in aid and contributions at ₹5,176.72 crore, 23.93% of the ₹21,636.15 crore of budget estimates are lagging far behind the projected figures.

Revenue expenditure in the form of interest payment, salaries and pension payment and subsidies is however mounting with interest alone accounting to ₹22,056 crore till January end much higher than the ₹17,729 crore projected in the budget estimates with two more months to go. Coupled with this was the Central government’s alleged negligence in making allocations to major projects in the Union budget presented in the Parliament earlier this month.

The neglect comes at a time when Chief Minister A. Revanth Reddy and his Cabinet colleagues made several rounds to the national capital seeking liberal assistance for key projects like the Regional Ring Road. In addition, the State’s borrowings had been restricted by the Union Finance citing over borrowings during the previous years leaving the government to fend for itself for raising the required resources.

Deputy Chief Minister Mallu Bhatti Vikramarka who holds the Finance portfolio, is conducting series of pre-budget meetings with the departments to understand their requirements and plan the allocation accordingly. Given this background, it will be interesting to see how the State government strikes a fine balance in budgetary allocations amid limited resources.