Welfare? Development? Andhra faces a perilous economic future

For some time now, serving and retired government employees in Andhra Pradesh have not received salaries and pensions on the first of the month.

A couple of months ago, IYR Krishna Rao, who retired as Andhra Pradesh chief secretary, tweeted: “This month’s pension came [to me] well after a week. Salaries [for government employees], pensions [for the retired personnel] and interest on debts shall be disbursed one day before or after the first of every month as mandatory in line with the allocations made in the budget which gets the approval of the legislative house annually. But the delay in payment of pensions depicts the gloomy picture of the state economy.” 

The ex-IAS officer’s case is indicative of the state’s perilous economic situation.

The Yuvajana Sramika Rytu Congress (YSRC), led by Jaganmohan Reddy, came to power in 2019 with a promise to implement nine welfare schemes, dubbed ‘Navaratnalu’. Unmindful of the financial situation in the bifurcated state, Jagan made big promises during electioneering, and the so-called Navaratnas thus topped the agenda once he became chief minister in May 2019.

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They include YSR Rytu Bharosa, which promises each farmer ₹50,000 over four years; fee reimbursement for students; Amma Vodi, under which parents of each school-going child get ₹15,000 every academic year; YSR Asara, which promises to waive dues of ₹20,000 crores owed by women in self-help groups; and pension pempu – ₹16,000 crore for the welfare of senior citizens and physically challenged. The nine schemes together cost a whopping ₹40,000 crore each year, according to official information.

Negative Growth

After being in the CM’s saddle for 27 months, the 49-year-old Jagan finds himself between the devil and the deep blue sea. Increasing expenditure on one hand and dwindling revenues on the other have forced the government to go on a borrowing spree to bridge the gap.

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According to the Andhra Pradesh Economic Survey Report 2020-21, industry and services sectors, the main sources of revenues, registered negative growth at -3.26 per cent and -6.7 per cent, respectively. The negative growth in the two sectors led to negative growth in GSDP (gross state domestic product), which was recorded at -2.58 per cent over the same period.

The scenario was the same in 2019-20 too. The dip in revenues has been attributed to sluggish industrial growth as a result of Jagan’s alleged adversarial politics, among others.

Jagan and Chandrababu: A Parallel

The YSR Congress’ 27-month rule brings into focus the conflicting welfare-development models of Jagan and his bête noir, N Chandrababu Naidu of the Telugu Desam Party. After winning the election, Jagan sought to present himself as a messiah of the poor. Naidu, after taking over the reins from his father-in-law NT Rama Rao in 1985, tried to steer the economy away from the welfare model towards a development model. The reforms Naidu initiated in the agriculture and power sectors cost him his job and he lost power to YS Rajasekhar Reddy, Jagan’s father, in 2004.

“Naidu put the state’s economy back on the rails after the NTR era, which initially ushered in the era of freebies such as ₹2 per kg rice scheme and subsidised power for agriculture,” IVR Krishna Rao, the first chief secretary of the bifurcated state with a stint in the previous TDP regime, told The Federal. Under the new dispensation, the state’s economy is now on the verge of collapse, he said.

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YSR won two consecutive elections, in 2004 and 2009, promising free power for farmers, fee reimbursement for students and other freebies.

Later, Naidu, in a bid to turn the tide in his favour, too tilted slightly towards welfare by struggling hard not to compromise on his mission to rebuild the truncated state during his latest stint as CM in 2014-19. He strove hard to promote industries, building dams and infra projects as part of the endeavour.

Industries on the Back Foot?

As the first leader of the bifurcated state, Naidu went the extra mile to create an industry-friendly environment by organising a series of investor summits in Visakhapatnam, inking MoUs with prospective investors from within and outside the country.

Naidu’s pro-industry initiatives and incentives yielded results, as automobile majors like Kia Motors, Isuzu and Hero Honda set up operations in the state. Celkon, a consumer mobile handset brand, and Franklin Templeton, an investment firm, also opened operations in Renigunta and Tirupati, respectively.

Almost all these companies, except Kia Motors, have wound up their operations for want of an investor-friendly environment under the new dispensation. According to a source in the Andhra Pradesh Economic Development Board (APEDB), during Naidu’s regime, investors signed MoUs worth ₹10 lakh crore. Following the change in government, those MoUs became worthless, the source said.

An industry representative from Visakhapatnam, requesting anonymity, told The Federal that not a single investor worth mentioning has come forward to invest in the state after the YSRC came to power. The Adani Group is the only exception.

Also read: After civic polls, Jagan pulls political coup with socio-electoral engineering

In November 2020 Adani Enterprises proposed to invest ₹14,634 crore for establishing an integrated data centre park, recreation centre, integrated IT and business park and skill development university in Visakhapatnam. But the proposal is yet to take off.

Deepening Debts

Faced with a mismatch between the revenues and expenditures, the state has to depend on borrowings to meet the heavy spending on welfare programmes. As a result, fiscal deficit has been estimated to grow at 5.38 per cent of the GSDP during 2021-22, well above the 5 per cent target set by the FRBM (Fiscal Responsibility and Budget Management) Act, 2005.

The TDP and the BJP have accused the government of raising funds over the FRBM Act’s target by circumventing RBI guidelines. The government floated AP State Development Corporation, through which it mobilised borrowings to the tune of ₹18,000 crore by escrowing future revenues to the lending agencies.

Public debt was ₹1.55 lakh crore by the time of Naidu’s exit in 2019. In the last two years, it has climbed to ₹2.64 lakh crore.

Also read: After civic polls, Jagan pulls political coup with socio-electoral engineering

Finance Minister Buggana Rajendranadh Reddy, talking to The Federal, brushed away criticism that the state has been pushed into a debt trap under Jagan’s rule.“After all, Andhra Pradesh, devoid of resources, has inherited debts from its bifurcation and Naidu’s financial mismanagement worsened the situation,” he said.

The pandemic has destroyed livelihoods; the government is feeding the poorest of the poor, the minister said.