Economy – Andhra Pradesh’s Fiscal Health Hits Decade Low in 2026 Report
Economy – Andhra Pradesh’s financial position has weakened significantly, reaching its lowest level in the past ten years, according to the latest Fiscal Health Index (FHI) 2026 report. The state secured a score of 23.1 and ranked 17th among 18 major states, highlighting growing concerns over its fiscal stability.
Sharp decline over the years
The recent ranking reflects a steady decline in Andhra Pradesh’s fiscal performance over time. The state had once held a strong position, ranking third nationally in 2014-15. However, its average position slipped to 11th between 2014 and 2017, and further dropped to 15th during 2017-20. The latest figures show a continued downward trend, driven by increasing financial pressure and limited revenue growth.
Rising debt raises sustainability concerns
The report points to a rapid rise in liabilities as a major concern. Between 2019-20 and 2023-24, the state’s total liabilities grew by more than 50%, reflecting a compound annual growth rate of about 12.7%. Andhra Pradesh’s debt-to-GSDP ratio reached 33%, noticeably higher than the average of 28.3% across major states.
Debt servicing is also putting pressure on finances. Interest payments accounted for 16.2% of revenue receipts, exceeding the national average. A key issue highlighted in the report is that a large portion of borrowings is being used to meet revenue expenditure rather than funding long-term productive assets, raising concerns about future returns on debt.
Fiscal deficits breach recommended limits
The state continues to struggle with fiscal discipline targets under the Fiscal Responsibility and Budget Management framework. In 2023-24, Andhra Pradesh recorded a revenue deficit of ₹38,683 crore, equivalent to 2.68% of GSDP. Its fiscal deficit rose to ₹62,720 crore, or 4.35% of GSDP, crossing the recommended ceiling of 4%.
While the state ranked 13th in the Debt Index, its debt sustainability score remained among the lowest in the country, indicating long-term risks. Additionally, Andhra Pradesh ranked 16th in fiscal prudence, reflecting ongoing structural challenges.
Weak revenue generation remains a challenge
Revenue mobilization continues to be a weak area for the state. Andhra Pradesh ranked 16th in the Revenue Mobilization Index, showing limited capacity to generate internal income. Although its own tax revenue has grown over the past five years, it still relies heavily on central transfers.
Taxes on commodities and services remain the largest contributors, followed by GST collections. However, non-tax revenue contributes only a small portion of total receipts and is largely dependent on mining income, exposing the state to sector-specific fluctuations.
Better spending quality offers some relief
Despite financial stress, Andhra Pradesh has performed relatively better in managing expenditure. The state ranked 12th in the Quality of Expenditure Index, indicating improved allocation of funds towards social and economic sectors. Spending on areas such as health, education, housing, irrigation, and energy has increased significantly, with total developmental expenditure rising by nearly 65% over five years.
Structural pressures limit flexibility
A major concern remains the high share of committed expenditure. Nearly half of the state’s revenue spending is absorbed by salaries, pensions, and interest payments, leaving limited room for new investments or growth-oriented initiatives.
Post-bifurcation challenges continue
Economists note that Andhra Pradesh’s fiscal difficulties are partly linked to structural changes following its bifurcation in 2014. Unlike some newly formed states that benefited from established urban centers or industrial bases, Andhra Pradesh had to rebuild its economic framework from scratch.
While recent improvements in expenditure quality suggest some progress, the state still faces the challenge of strengthening revenue streams and managing debt sustainably to ensure long-term fiscal stability.