The Finance Minister of Telangana, Mr. T. Harish Rao, presented the Budget for the state for the financial year 2023-24 on February 6, 2023.

Budget Highlights

  • The Gross State Domestic Product (GSDP) of Telangana for 2023-24 (at current prices) is roughly estimated to be Rs 14 lakh crore, an increase of 6.7% over 2022-23.

  • Expenditure (excluding debt repayment) in 2023-24 is estimated to be Rs 2,77,690 crore, an increase of 23% over the revised estimates of 2022-23.  In addition, debt of Rs 12,706 crore will be repaid by the state in 2023-24.

  • Receipts (excluding borrowings) for 2023-24 are estimated to be Rs 2,39,455 crore, an increase of 30.6% as compared to the revised estimate of 2022-23.  In 2022-23, receipts (excluding borrowings) are estimated to fall short of the budget estimate by Rs 17,227 crore (decrease of 9%).

  • Revenue surplus in 2023-24 is estimated to be Rs 4,882 crore, higher than the revised estimates for 2022-23 (Rs 2,980 crore).  The revised estimates of the revenue surplus in 2022-23 are 0.2% of GSDP (Rs 2,980 crore), lower than the budget estimate of 0.3% of GSDP for 2022-23 (Rs 3,755 crore).

  • Fiscal deficit for 2023-24 is projected to be Rs 38,235 crore, which is targeted at 2.7% of GSDP.  In 2022-23, as per the revised estimates, the fiscal deficit is expected to be 3.2% of GSDP, lower than the budget estimate of 4.0% of GSDP.

Policy Highlights

  • Irrigation and Command Area Development:  Irrigation facilities will be extended to over 50 lakh acres over the next two to three years, in addition to the 73 lakh acres for which they are currently available.

  • Judiciary:  60 Courts will be established in 2023-24 including Junior, Senior and District Judge Courts. In 23 newly created districts, 1,721 posts have been sanctioned for District Courts and Legal Services.

  • Health:  Nine new medical colleges will be established in 2023, with nursing colleges attached.  This will increase the number of medical colleges in Telangana to 26.

Telangana’s Economy

  • GSDP:  In 2022-23, Telangana’s GSDP (at constant prices) is estimated to grow at 7.4%., which is less than growth of 10.9% in 2021-22.  In 2022-23, India’s GDP is estimated to grow by 7%.

  • Sectors:  In 2022-23, the agriculture sector is estimated to grow at 3.4%, higher than in 2021-22 (in real terms).  However, both services and manufacturing sectors are estimated to grow at a lower rate in 2022-23 as compared to 2021-22.  In 2022-23, agriculture, manufacturing, and services sectors are estimated to contribute 21%, 17%, and 63% of the economy, respectively (at current prices).

  • Per capita income:  The per capita income of Telangana in 2022-23 (at current prices) is estimated at Rs 3,17,115, an increase of 15.1% over the per capita income of 2021-22 (Rs 2,75,443).

Figure  1 : Growth in GSDP and sectors in Telangana at constant prices (2011-12)

 image

Note: These numbers are as per constant prices (2011-12) which implies that the growth rate is adjusted for inflation.
Sources: Telangana Socio-Economic Outlook 2022; PRS.

Budget Estimates for 2023-24

  • Total expenditure (excluding debt repayment) in 2023-24 is targeted at Rs 2,77,690 crore.  This is an increase of 23% over the revised estimate of 2022-23.  This expenditure is proposed to be met through receipts (excluding borrowings) of Rs 2,39,455 crore and net borrowings of Rs 46,318 crore.  These include inter-state settlement amounting to Rs 17,828 crore, and loans for urban development, amounting to Rs 5,000 crore.   Total receipts for 2023-24 (other than borrowings) are expected to register an increase of 31% over the revised estimate of 2022-23.

  • In 2023-24, the state is estimated to observe a revenue surplus of Rs 4,882 crore, which is 0.3% of GSDP.  In comparison, in 2022-23, the state is expected to observe a revenue surplus of 0.2% of GSDP as per the revised estimates.

  • Fiscal deficit for 2023-24 is estimated to be 2.7% of GSDP (Rs 38,235 crore).  In 2022-23, the state has estimated a fiscal deficit of 3.2% of GSDP, lower than the limit of 4% of GSDP permitted by the central government for that year (of which 0.5% of GSDP becomes available upon undertaking power sector reforms).

Table  1 : Budget 2023-24 - Key figures (in Rs crore)

Items

2021-22

Actuals

2022-23

BE

2022-23

RE

% change from BE 22-23 to RE 22-23

2023-24

BE

% change from RE 22-23 to BE 23-24

Total Expenditure

2,50,272

2,56,959

2,37,712

-7.5%

2,90,396

31.4%

(-) Repayment of debt

76,117

11,702

11,702

-84.6%

12,706

8.6%

Net Expenditure (E)

1,74,155

2,45,257

2,26,010

-7.8%

2,77,690

22.9%

Total Receipts

2,46,569

2,52,761

2,33,784

-7.5%

2,85,773

22.2%

(-) Borrowings

1,19,053

59,672

50,422

-15.5%

46,318

-8.1%

Net Receipts (R)

1,27,516

1,93,089

1,83,362

-5.0%

2,39,455

30.6%

Fiscal Deficit (E-R)

46,639

52,167

42,647

-18.2%

38,235

-10.3%

as % of GSDP

4.1%

4.0%

3.2%

 

2.7%

 

Revenue Balance

-9,335

3,755

2,980

-20.6%

4,882

63.8%

as % of GSDP

-0.8%

0.3%

0.2%

 

0.3%

 

Primary Deficit

27,478

33,255

23,736

-28.6%

15,827

-33.3%

as % of GSDP

2.4%

2.5%

1.8%

 

1.1%

 

Note: BE is Budget Estimates; RE is Revised Estimates.  Estimates include inter-state settlement in actual expenditure for 2021-22, revised estimates for receipts in 2022-23, and budget estimates for receipts in 2023-24, and transfers to the Contingency Fund in 2021-22.  Sources: Budget in Brief, Telangana Budget 2023-24; Telangana Socio-Economic Outlook 2022; PRS.

Capital outlay

In 2023-24, capital outlay is estimated to increase by 39% over 2022-23 revised estimates.  Sectors with high increases include (i) irrigation and flood control (28%), (ii) education (85%), and transport (15%).

Expenditure in 2023-24

  • Revenue expenditure for 2023-24 is proposed to be Rs 2,11,685 crore, an increase of 22% over the revised estimate of 2022-23.  This includes the expenditure on salaries, pensions, interest, grants, and subsidies.

  • Capital outlay for 2023-24 is proposed to be Rs 37,525 crore, an estimated increase of 39% over the revised estimate of 2022-23.  Capital outlay indicates the expenditure towards creation of assets.

Table  2 :  Expenditure budget 2023-24 (in Rs crore)

Items

2021-22 Actuals

2022-23 BE

2022-23 RE

% change from BE 22-23 to RE 22-23

2023-24 BE

% change from RE 22-23 to BE 23-24

Revenue Expenditure

1,36,803

1,89,275

1,72,822

10%

2,11,685

22%

Capital Outlay

28,874

29,728

26,934

-9%

37,525

39%

Loans given by the state

8,469

26,253

26,253

0%

28,480

8%

Net Expenditure

1,74,155

2,45,257

2,26,010

-8%

2,77,690

23%

Note: Estimates include inter-state settlement, transfers to the Contingency Fund; Source: Annual Financial Statement, Telangana Budget 2023-24; PRS.

Committed expenditure: Committed expenditure of a state typically includes expenditure on payment of salaries, pensions, and interest. Allocation of a large portion of the budget towards committed expenditure items limits the state’s flexibility to decide on other expenditure priorities such as developmental schemes and capital outlay. Estimation for allocation towards salaries in 2023-24 is not available.  As per revised estimates of 2022-23, Telangana is estimated to spend Rs 59,831 crore on committed expenditure items, which is 34% of its revenue receipts. In 2023-24, the state is estimated to spend 6% of its revenue receipts on pension and 10% on interest payments.

Table  3 : Committed Expenditure in 2023-24 (in Rs crore)

Items

2021-22 Actuals

2022-23 BE

2022-23 RE

% change from BE 22-23 to RE 22-23

2023-24 BE

% change from RE 22-23 to BE 23-24

Salaries

26,909

 

29,535

 

 

 

Pension

14,025

11,385

11,385

0%

13,024

14%

Interest

19,161

18,912

18,912

0%

22,408

18%

Committed Expenditure

60,095

-

59,831

-

-

-

Note: Estimation for allocation towards salaries in 2023-24 is not available.  Sources: Budget in Brief and Annual Financial Statement, Telangana Budget 2023-24; PRS.

Sector-wise expenditure: The sectors listed below account for 69% of the total expenditure on sectors by the state in 2023-24.  A comparison of Telangana’s expenditure on key sectors with that by other states is shown in Annexure 1.

Table  4 : Sector-wise expenditure under Telangana Budget 2023-24 (in Rs crore)

Sectors

2021-22 Actuals

2022-23 BE

2022-23 RE

2023-24 BE

% change from RE 22-23 to BE 23-24

Budget Provisions

2023-24 BE

Welfare of SC, ST, OBC, and Minorities

15,849

31,427

24,727

33,075

34%

  • Rs 17,700 crore has been allocated for Dalit Bandhu Scheme

Agriculture and Allied Activities

19,712

27,228

23,628

 29,164

23%

  • Rs 11,704 crore has been allocated for Investment Support Scheme for farmers.

Social Welfare and Nutrition

12,391

18,602

17,602

 19,416

10%

  • Rs 2,740 crore has been allocated towards Aasara pensions.

Education, Sports, Arts, and Culture

14,406

16,043

16,043

 18,955

18%

  • Rs 11009 crore has been allocated for assisting local bodies with school education

Energy

12,921

15,096

14,594

 16,677

14%

  • Rs 8,260 crore has been allocated for assistance to Transmission Corporation of Telangana Limited.
  • Rs 500 crore have been allocated for taking over discom losses under UDAY scheme.

Health and Family Welfare

6,930

10,954

10,954

 12,378

13%

  • Rs 1,070 crore has been allocated towards Urban Health Services - Allopathy.
  • Rs 687 crore have been allocated towards Rural Health Services – Allopathy.

Housing

299

12,172

8,112

12,140

50%

  • Rs 11000 crore allocated for the Construction of two-bedroom houses for rural and urban poor.

Irrigation and Flood Control

13,886

10,946

8,947

 11,169

25%

  • Rs 8,493 crore has been allocated for capital outlay on major irrigation.

Transport

4,199

8,016

7,516

 10,060

34%

  • Rs 4,552 crore has been allocated for capital outlay on roads and bridges.

Police

7,659

8,764

8,764

 9,023

3%

  • Rs 3,310 crore has been allocated towards district police.

% of total expenditure on all sectors

65%

73%

71%

69%

 

 

Sources: Annual Financial Statement, Telangana Budget 2023-24; PRS.
 

Receipts in 2023-24

Total revenue receipts for 2023-24 are estimated to be Rs 2,16,567 crore, an increase of 23% over the revised estimate of 2022-23.  Of this, Rs 1,53,837 crore (71%) will be raised by the state through its own resources, and Rs 62,730 crore (29%) will come from the centre.  Resources from the centre will be in the form of state’s share in central taxes (10% of revenue receipts) and grants (19% of revenue receipts).

  • Devolution:  In 2023-24, state’s share in central taxes is estimated at Rs 21,471 crore, an increase of 9% over the revised estimate of 2022-23.

  • Grants from the centre in 2023-24 are estimated at Rs 41,259 crore, an increase of 36% over the revised estimates for 2022-23.

  • Inter-state settlement: Telangana is estimated to receive Rs 17,828 crore as inter-state settlement in 2023-24, and will receive Rs 7,500 crore in 2022-23 as per revised estimates.

  • State’s own tax revenue:  Telangana’s total own tax revenue is estimated to be Rs 1,31,029 crore in 2023-24, an increase of 18% over the revised estimate of 2022-23.  Own tax revenue as a percentage of GSDP is estimated at 9.3% in 2023-24.  For 2022-23, the state had estimated this ratio at 8.3%.

Table  5 : Break-up of the state government’s receipts (in Rs crore)

Sources

2021-22

Actuals

2022-23

BE

2022-23

RE

% change from BE 22-23 to RE 22-23

2023-24

BE

% change from RE 22-23 to BE 23-24

State's Own Tax

91,271

1,08,212

1,10,592

2%

1,31,029

18%

State's Own Non-Tax

8,857

25,422

15,292

-40%

22,808

49%

Share in Central Taxes

18,721

18,394

19,668

7%

21,471

9%

Grants-in-aid from Centre

8,619

41,002

30,250

-26%

41,259

36%

Revenue Receipts

1,27,469

1,93,029

1,75,802

-9%

2,16,567

23%

Inter-state settlement 

 

 

7,500

 

17,828

138%

Non-Debt Capital Receipts

48

60

60

0%

5,060

8333%

Net Receipts

1,17,180

1,93,089

1,83,362

-5%

2,39,455

31%

Note: BE is Budget Estimates; RE is Revised Estimates.
Sources: Annual Financial Statement, Telangana Budget 2023-24; PRS.

Inter-state settlement

Inter-state settlement refers to the sums owed by one government to another following the establishment of a new state, as well as between India and other countries.  The 2023-24 budget estimates that Telangana will receive Rs 17,828 crore as inter-state settlement.  The state is estimated to receive Rs 7,500 crore in 2022-23 at the revised estimate stage from inter-state settlement.

  • In 2023-24, State GST is estimated to be the largest source of own tax revenue (34% share).  State GST revenue is estimated to increase by 22% over the revised estimates of 2022-23. 

  • Revenue from sales tax/VAT in 2023-24 is expected to see an increase of 20% (Rs 39,500 crore) compared to revised estimates for 2022-23.

Table  6 :   Major sources of state’s own-tax revenue (in Rs crore)

Taxes

2021-22

Actuals

2022-23

BE

2022-23

RE

% change from BE 22-23 to RE 22-23

2023-24

BE

% change from RE 22-23 to BE 23-24

State GST

28,917

36,203

36,203

0%

44,000

22%

Sales Tax/ VAT

26,974

33,000

33,000

0%

39,500

20%

Stamps Duty and Registration Fees

12,373

15,600

15,600

0%

18,500

19%

Taxes on Vehicles

4,381

4,953

6,453

30%

7,512

16%

State Excise

17,482

17,500

17,500

0%

19,885

14%

Land Revenue

0

7

7

0%

12

80%

Taxes and Duties on Electricity

548

32

912

2789%

751

-18%

GST Compensation Grants

2,006

3,000

2,248

-25%

1,237

-45%

GST Compensation Loans

4,569

-

-

 

-

0.6%

Sources: Annual Financial Statement, Revenue Budget, and Budget in Brief statements, Telangana Budget 2023-24; PRS.

Deficits, Debt, and FRBM Targets for 2023-24

The Telangana Fiscal Responsibility and Budget Management Act, 2005 provides annual targets to progressively reduce the outstanding liabilities, revenue deficit and fiscal deficit of the state government.

Revenue surplus: It is the excess of revenue receipts over revenue expenditure.  A revenue surplus implies that the government does not need to borrow to finance those expenses which do not increase its assets or reduces its liabilities.  The budget estimates a revenue surplus of Rs 4,882 crore (or 0.3% of GSDP) in 2023-24.  In 2022-23, the revenue surplus is expected to be Rs 2,980 crore (0.2% of GSDP) as per revised estimates.  As per the 15th Finance Commission recommendations, Telangana will not receive any revenue deficit grant from 2021-22 to 2025-26.  

Off-budget Borrowings

Off-budget borrowings refer to borrowings made by government-owned entities such as special purpose vehicles and public sector enterprises, debt servicing of which is done through budgetary resources.  This causes debt and deficit numbers to be understated.  CAG reports have highlighted use of off-budget borrowings by Telangana Government. In the report on Telangana’s finances in 2020-21, the CAG noted that outstanding liabilities as a percentage of GSDP was 28.1%, within the limit of 29.5% of GSDP prescribed by the Fifteenth Finance Commission.  However, if off-budget borrowings were included, total outstanding liabilities would be significantly higher than the limit, at 38.1%.

Fiscal deficit:  It is the excess of total expenditure over total receipts.  This gap is filled by borrowings by the government and leads to an increase in total liabilities.  In 2023-24, the fiscal deficit is estimated to be 2.7% of GSDP.  For 2023-24, the central government has permitted a fiscal deficit of up to 3.5% of GSDP.   As per the revised estimates, in 2022-23, the fiscal deficit of the state is expected to be 3.2% of GSDP, which is lower than the budget estimate of 4.0% of GSDP.

Outstanding liabilities:  Outstanding liabilities is the accumulation of total borrowings at the end of a financial year. It also includes any liabilities on the public account.   At the end of 2023-24, the outstanding liabilities are estimated to be 23.8% of GSDP, slightly lower than the revised estimate for 2022-23 (24.3%).

Outstanding government guarantees: Outstanding liabilities of states do not include a few other liabilities that are contingent in nature, which states may have to honour in certain cases. State governments guarantee the borrowings of State Public Sector Enterprises (SPSEs) from financial institutions. At the end of 2022-23, government guarantees are estimated to be Rs 1,29,244 crore (11.3% of GSDP as per revised estimates).

Figure  2 : Revenue and Fiscal Balance (% of GSDP) 

image

Note: RE is Revised Estimates; BE is budget estimates, a positive number indicates a surplus, a negative number indicates a deficit; revenue balance projections for 2023-25 and 2025-26 are not provided.  Sources: Macroeconomic Framework Statement, Telangana Budget 2023-24; PRS.

Figure  3 : Outstanding Liabilities (% of GSDP)

image

Note: *Figures for 2024-25 and 2025-26 are projections; RE: Revised Estimates; BE: Budget Estimates.
Sources: Macroeconomic Framework StatementTelangana Budget 2023-24; PRS.

 


Annexure 1:  Comparison of states’ expenditure on key sectors

The graphs below compare Telangana’s expenditure in 2023-24 on six key sectors as a proportion of its total expenditure on all sectors.  The average for a sector indicates the average expenditure in that sector by 31 states (including Telangana) as per their budget estimates of 2022-23.  [1]

  • Education: Telangana has allocated 7.6% % of its expenditure on education in 2023-24.  This is lower than the average allocation for education by states in 2022-23 (14.8%).

  • Health:  Telangana has allocated 5% of its total expenditure towards health, which is less than the average allocation for health by states (6.3%).

  • Rural development:  Telangana has allocated 3.6% of its expenditure on rural development.  This is lower than the average allocation for rural development by states (5.7%).

  • Urban development:  Telangana has allocated 2.8% of its expenditure towards urban development.  This is lower than the average allocation towards urban development by states (3.5%).

  • Police:  Telangana has allocated 3.6% of its total expenditure towards police, which is lower than the average expenditure on police by states (4.3%).

  • Roads and bridges:  Telangana has allocated 3.7% of its total expenditure towards roads and bridges, which is lower than the average allocation by states (4.5%).

image

image

image

image

image

Note: 2021-22, 2022-23 (BE), 2022-23 (RE), and 2023-24 (BE) figures are for Telangana.
Sources: Annual Financial Statement, Telangana Budget 2023-24; various state budgets; PRS.

 

  [1]  The 31 states include the Union Territories of Delhi, Jammu and Kashmir, and Puducherry .

Annexure 2:   Comparison of 2021-22 Budget Estimates and Actuals

The following tables compare the actuals of 2021-22 with budget estimates for that year.

Table  7 : Overview of Receipts and Expenditure (in Rs crore)

Particular

2021-22 BE

2021-22 Actuals

% change from BE to Actuals

Net Receipts (1+2)

1,76,177

1,27,516

-28%

1.  Revenue Receipts (a+b+c+d)

1,76,127

1,27,469

-28%

a.  Own Tax Revenue

92,910

91,271

-2%

b.  Own Non-Tax Revenue

30,557

8,857

-71%

c.  Share in central taxes

13,990

18,721

34%

d.  Grants-in-aid from the Centre

38,669

8,619

-78%

2.  Non-Debt Capital Receipts

50

48

-5%

3.  Borrowings

49,300

1,19,053

141%

Net Expenditure (4+5+6)

2,21,687

1,74,147

-21%

4.  Revenue Expenditure

1,69,383

1,36,803

-19%

5.  Capital Outlay

29,047

28,874

-1%

6.  Loans and Advances

23,256

8,469

-64%

7.  Debt Repayment

9,139

76,117

733%

Revenue Balance

6,744

-9,335

-238%

Revenue Balance (as % of GSDP)*

0.6%

-0.8%

-238%

Fiscal Deficit

45,510

46,639

2%

Fiscal Deficit (as % of GSDP)

4.0%

4.1%

2%

Note: BE: Budget Estimates.  For calculating deficits, GST compensation loan not treated as grants.
Sources: Telangana Budget Documents of various years; PRS.

Table  8 : Key Components of State's Own Tax Revenue (in Rs crore)

Sector

2021-22 BE

2021-22 Actuals

% change from BE to Actuals

Land Revenue

6

0

-96%

Taxes on Vehicles

5,000

4,381

-12%

State GST

31,000

28,917

-7%

Stamps Duty and Registration Fees

12,500

12,373

-1%

Sales Tax/ VAT

26,500

26,974

2%

State Excise

17,000

17,482

3%

Taxes and Duties on Electricity

30.

548

1727%

Sources: Telangana Budget Documents of various years; PRS.

Table  9 : Allocation towards Key Sectors (in Rs crore)

Sector

2021-22 BE

2021-22 Actuals

% change from BE to Actuals

Housing

11,151

299

-97%

Urban Development

10,555

2,665

-75%

Social Welfare and Nutrition

18,997

12,391

-35%

Transport

6,123

4,199

-31%

of which Roads and Bridges

5,187

2,341

-55%

Agriculture and Allied Activities

26,822

19,712

-27%

Welfare of SC, ST, OBC, and Minorities

15,729

15,849

1%

Education, Sports, Arts, and Culture

13,498

14,406

7%

Rural Development

6,728

7,389

10%

Health and Family Welfare

5,868

6,930

18%

Energy

10,663

12,921

21%

Police

6,049

7,659

27%

Water Supply and Sanitation

3,962

6,442

63%

Irrigation and Flood Control

7,979

13,886

74%

Sources: Telangana Budget Documents of various years; PRS.

 

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