Growth only on paper? T’s 21% revenue shortfall hits govt spending

Hyderabad: Despite high per capita income and clocking one of the fastest GDP growth rates in the country, Telangana has faced persistent budget shortfalls over the past decade.Between 2015-16 and 2023-24, the state consistently fell short of its own revenue projections. On average, Telangana's annual revenue collections were 21% lower than what was originally estimated in the budget — the widest gap among all states in the country during this period. As a result, the state also ended up spending 16% less than what it had planned each year.
The findings are part of the State Finances Report for 2024-25, which examined how states performed against their budget estimates. Across India, states on average collected about 10% less revenue than projected between 2015-16 and 2023-24. However, Telangana and Andhra Pradesh recorded the steepest shortfalls among larger states, at 21% and 20% respectively. Karnataka was the only major state that managed to meet its revenue targets.To understand the gap, it is important to look at how state budgets are structured. A budget has three key components: Budget estimates, revised estimates and actuals. Budget estimates are projections made for the upcoming financial year and are voted upon by the state legislature. Revised estimates adjust these projections during the year based on real-time financial performance. Actuals are the final audited figures for the previous year.Comparing these three figures helps assess how realistic a govt's projections are. In Telangana's case, the wide gap between budget estimates and revised or actual figures over several years points to persistent overestimation of revenue. When expected income does not materialise, spending plans are also scaled down. That partly explains why the state's actual expenditure was, on average, 16% lower than its initial budgeted outlay.FRBM limitsWhen revenues fall short, states have limited options. They can either cut spending or increase borrowing. However, borrowing is capped under the Fiscal Responsibility and Budget Management framework and limits set by the Centre. If borrowing legroom is insufficient, expenditure cuts become inevitable.Signs of pressure are visible in the current financial year as well. Telangana had proposed to borrow Rs 54,000 crore in its budget. But by the end of Dec 2025, the state had already borrowed Rs 69,930 crore — 22% more than the original target.Vicious cycleExperts caution that repeated shortfalls and higher borrowings can create a vicious cycle. "These measures include improving non-tax revenue, cutting down unnecessary expenditure, and assessing the need for subsidies," said an expert.Telangana's economic growth story remains strong on paper. But the widening gap between promise and performance in its budgets raises questions about fiscal planning and sustainability, especially at a time when development commitments and welfare spending remain high.Get the latest lifestyle updates on Times of India, along with Valentine's day wishes, messages and quotes !