The Fiscal Health Index (FHI), developed by NITI Aayog, is a comprehensive framework to assess the fiscal performance of 18 major Indian states. It evaluates states across five key indicators:
Quality of Expenditure, Revenue Mobilization, Fiscal Prudence, Debt Index, and Debt Sustainability. The analysis reveals significant variations in fiscal health across states, with Odisha, Chhattisgarh, Goa, Jharkhand, and Gujarat emerging as top performers, while Haryana, Kerala, West Bengal, Andhra Pradesh, and Punjab face greater fiscal challenges.
Andhra Pradesh: Fiscal Health Overview
Revenue Mobilization
Andhra Pradesh has seen moderate growth in its own tax revenue, with a CAGR of ~6% from 2018-19 to 2022-23. Non-tax revenue grew at an average annual rate of 4.3%. However, the growth rate of own revenue declined from 17.1% in 2018-19 to 9.8% in 2022-23.
Fiscal Prudence
The state has been in revenue deficit and fiscal deficit over the past five years. In 2022-23, the fiscal deficit was 4% of GSDP, within the target of 4.5% set by the Andhra Pradesh Fiscal Responsibility and Budget Management (FRBM) Act.
Debt Index & Debt Sustainability
Public debt has been increasing at an average rate of 16.5% from 2018-19 to 2022-23. Interest payments rose by 15% in 2022-23 and grew at a 10% CAGR over the past five years. The ratio of interest payments to revenue receipts has shown an increasing trend, indicating challenges in managing debt levels effectively.
Key Focus Areas for AP
Andhra Pradesh needs to focus on expediting revenue collection, progressing ongoing projects, and restructuring loans to maintain interest payments within fiscal deficit targets for improved fiscal health.
Telangana: Fiscal Health Overview
Revenue Mobilization
Telangana ranks 2nd nationally in revenue mobilization with a score of 75.2. This strong performance is due to higher receipts from sectors like Miscellaneous General Services, Non-ferrous Mining, Forestry, Crop Husbandry, and Major Irrigation.
Fiscal Prudence
The state ranks 9th in fiscal prudence with a score of 40.8. Its fiscal deficit has remained within prescribed limits from 2018-19 to 2022-23.
Debt Index & Debt Sustainability
Telangana ranks 9th in the Debt Index with a score of 53.3, indicating a moderate debt profile. However, it ranks low in debt sustainability with a score of 11.7, suggesting challenges in managing its debt levels effectively.
Key Focus Areas for Telangana
Telangana needs to address its debt sustainability issues and enhance fiscal prudence to maintain long-term fiscal stability.
While Telangana outperforms Andhra Pradesh in revenue mobilization, both states face challenges in fiscal prudence and debt sustainability. Andhra Pradesh, in particular, needs to focus on expediting revenue collection and restructuring loans to improve its fiscal health. Telangana, despite its strong revenue performance, must address its debt sustainability issues to maintain long-term fiscal stability.
