In a stark display of fiscal indiscipline, the Telugu states of Telangana and Andhra Pradesh have emerged as the country's most aggressive borrowers in 2025, dramatically exceeding the loan limits they had formally declared to the Reserve Bank of India (RBI). This significant deviation from their own borrowing calendars has triggered alarm among economists, who foresee mounting long-term financial stress for both states.
Alarming Scale of Borrowing Beyond Limits
The data, highlighted in an Ecowrap report from the State Bank of India's economic research department, reveals a worrying trend. For the period from April to November 2025, Telangana borrowed nearly 190% more than its notified limit. The state had informed the RBI of a loan requirement of Rs 31,600 crore but ended up raising a staggering Rs 60,000 crore.
Similarly, Andhra Pradesh overshot its communicated borrowing ceiling by 122%. While its schedule pegged the requirement at Rs 40,150 crore until November, the state actually raised Rs 49,072 crore. This pattern of breaching self-imposed caps underscores a deepening fiscal crisis.
Long-Term Commitments and Mounting Risks
A state-wise analysis indicates that both states are heavily reliant on issuing 10-year securities. This strategy locks them into repayment commitments that will stretch well into the next decade, limiting future financial flexibility.
Economists point out that the aggressive borrowing is driven by ambitious welfare and infrastructure plans. However, they warn that without immediate spending discipline and a focus on revenue generation, the debt burden could soon become unsustainable. The states risk entering a dangerous cycle where new borrowing is used merely to service old debt.
Experts Warn of "Unbearable" Burden
Krishna Reddy Chittedi, an associate professor at the School of Economics, University of Hyderabad, explained the peril. "When the repayment of loans is achieved by borrowing more loans, it is a concerning sign. The fiscal position may start to show serious implications in the short term," he said.
He further cautioned that if the income-generating projects, for which the loans are ostensibly taken, fail to deliver projected revenues, the financial burden will become "double and unbearable." Professor Chittedi urged states to curb wasteful expenditures, including corporate subsidies like deferred power bills to industries and allocating land at minimal cost without securing substantial returns or local job creation.
Expenditure Quality, Not Central Funds, is Key
The Ecowrap report emphatically states that the devolution of funds from the Central government is not the primary reason behind the borrowing spike. It notes that historically, states have remained below their borrowing caps, except during the pandemic years. The fact that a larger number of states crossed limits in 2025 points to internal fiscal management issues.
"This clearly implies that the Centre's devolution is never a major reason behind states' borrowing. It is the quality of expenditure that is of paramount importance," the report concluded. The data paints a clear picture of mounting fiscal strain in the two Telugu states, raising urgent questions about the sustainability of their current financial trajectories.
