The recently presented Andhra Pradesh state budget for the financial year 2026-27, marking nearly two years since the Telugu Desam Party-led alliance assumed power, lays bare a troubling pattern of overestimation that threatens to undermine the very purpose of budgetary planning.
When Chief Minister Chandrababu Naidu assumed office, he pledged to transform the state's financial landscape, promising to eliminate borrowing while simultaneously expanding welfare programmes through increased wealth generation. The reality, however, tells a starkly different story—one of missed targets, inflated projections, and a mounting debt burden that threatens to constrain the state's developmental trajectory for years to come.
Let me explain.
The fundamental principle underlying any credible budget is the accurate estimation of receipts. Without realistic revenue projections, the entire edifice of planned expenditure crumbles.
Last year, the government had presented a budget estimate of Rs 1,28,126 crore for the state’s own revenues in FY 2025-26. This amount includes the state’s non-tax revenue and tax revenue, excluding the share of central taxes.
But according to the state government's own provisional accounts, the actual revenue during the first ten months was much lower.
According to the latest Monthly Key Indicators (MKI) report of the Comptroller and Auditor General (CAG), the state’s actual non-tax revenue till January 2026 was only Rs 4,676 crore.
The total tax revenue, including central taxes, was Rs 1,17,413 crore. The Union government recently declared that it had transferred Rs 11,39,767 crore as taxes devolved to states as of January, of which Andhra’s share would amount to Rs 46,126 crore (a 4% share, as per the 15th Finance Commission). Excluding this amount, the actual state’s own tax revenue till January 2026 would stand at Rs 71,287 crore.
This brings the actual state’s own revenue in the first ten months of FY26 to only Rs 75,964 crore.
This means with two months left for the year to end, there’s a staggering shortfall in the state’s own revenue of approximately Rs 52,162 crore from the budgeted figure last year. This exposes a systemic failure in revenue estimation that cannot be attributed to unforeseen circumstances.
When confronted with such discrepancies, the revised estimates presented alongside the budget for FY 2026-27 offer little consolation.
In the budget 2026-27 presented in February, the revised estimate of the state's own revenues for the previous year was Rs 1,12,349 crore—a figure that demands scrutiny. Considering that the actual revenue in the first ten months was only Rs 75,964 crore, for this revised estimate to materialise, the state would need to collect Rs 36,385 crore–an average of Rs 18,192 crore per month during February and March 2026.
This represents an astronomical 140% increase over the average monthly collection of Rs 7,596 crore recorded during the first ten months of the fiscal year. Such expectations defy both logic and historical precedent.
The granular breakdown of revenue categories reveals the extent of the over-optimism permeating through the budget documents.
State Excise Duty, for instance, was recorded as Rs 14,968 crore till January, an average monthly collection of Rs 1,497 crore during the first ten months as per the MKI report. The budget, however, projects a revised estimate of Rs 23,648 crore for the whole year – a shortfall of Rs 8,680 crore which would require average monthly collections of Rs 4,340 crore for the final two months—a near-190% increase that appears virtually unattainable.
Similarly, State Non-Tax Revenues, which averaged Rs 468 crores monthly over the first ten months, are expected to surge to Rs 4,824 crores per month in the closing period to reach the revised estimate of Rs 143,24 crore, representing an implausible growth of over 930%.
The budget estimates for FY 2026-27 perpetuate this pattern of ambitious yet unrealistic projections.
Based on the actual revenues during the first ten months of FY 2025-26 at a monthly average of Rs 7,596 crore, a realistic estimation of annual revenues would hover around Rs 92,000 crore.
Yet, the budget for FY 2026-27 projects the state's own revenues at Rs 1,37,320 crore for the upcoming year, nearly 50% higher than realistic estimates of the previous year's collections.
This projection assumes growth rates across revenue categories that appear disconnected from the ground reality of the state's economic performance.
Let’s look at the State Goods and Services Tax (SGST), for instance.
The total GST collected in Andhra Pradesh till January 2026 was Rs 42,057 crore, including the Central GST (CGST) share, as per the MKI report. The state’s share of Union taxes mentioned in the same report, excluding CGST, was Rs 31,761 crore. As noted earlier, Andhra’s share in the taxes devolved from the Union government (including CGST) till January 2026, is Rs 46,126 crore. The difference shows the CGST share – Rs 14,365 crore. Removing this from the total GST reveals the SGST collected in the first ten months of 2025-26 – Rs 27,693 crore.
At a monthly average of Rs 2,769 crore, the SGST for 2025-26 can be expected to come up to Rs 33,231 crore. But the state government has budgeted SGST at Rs 45,078 crore for FY 2026-27, implying a growth of over 29% from realistic estimations.
Similarly, Stamps and Registration revenues face an even more ambitious target of Rs 18,701 crore, representing a 63% increase from reasonable projections for the previous year.
State Excise Duty is expected to contribute Rs 30,067 crore—a growth of nearly 60% that appears divorced from the demonstrated revenue generation capacity of the department.
This sustained pattern of overestimation carries profound implications for the state's fiscal health. When budgeted allocations fail to materialise due to revenue shortfalls, essential programmes suffer, capital expenditure is deferred, and the burden of unfulfilled promises weighs heavily on governance credibility.
The performance metrics paint an unambiguous picture of fiscal distress. Andhra’s own revenues registered a mere 2.86% year-on-year growth in FY 2024-25 and the first ten months of FY 2025-26 have yielded only a 4.25% increase over the corresponding period of the previous year. This stagnation in revenue generation has forced the government into an increasing reliance on borrowing.
The aggregate of direct state government debt and gross off-budget borrowings contracted during the last two financial years has reached Rs 3,27,370 crore, a staggering sum that will burden future generations with repayment obligations.
Perhaps most alarming is the impact on capital expenditure, the lifeblood of long-term economic development.
Capital expenditure during FY 2024-25 amounted to only Rs 16,141.28 crore, representing a decline of over 30% from the previous year.
The first ten months of FY 2025-26 witnessed capital expenditure of Rs 21,675 crore—merely 53% of the budgeted allocation for the entire year. While the budget for FY 2026-27 projects a capital expenditure of Rs 48,697.71 crore, the history of underperformance suggests that crucial infrastructure and development projects will continue to face funding constraints.
The TDP alliance government's attempts to deflect accountability by referencing the previous administration ring increasingly hollow as their tenure extends. Nearly two years into governance, the narrative of inherited problems cannot sustain credibility when the demonstrated performance shows consistent underachievement against self-established targets. CM Naidu’s self-portrayal as a visionary administrator demands substantiation through results, not through increasingly implausible budget projections that serve political optics rather than fiscal prudence.
The constitutional framework governing state budgets establishes a sacred covenant between the government and its citizens. Through this legislative process, the priorities of the administration are revealed, and the allocation of public resources from the Consolidated Fund is authorised. However, under the TDP alliance government in Andhra Pradesh, this solemn exercise of budgetary planning has been rendered increasingly ineffective, transforming what should be a roadmap for governance into what appears to be a work of fiscal fiction.
Buggana Rajendranath is a former Finance Minister of Andhra Pradesh and a leader of the YSR Congress Party (YSRCP). Views expressed are the author’s own.