CAG Report Uncovers Alarming Decline in Andhra Pradesh's Capital Expenditure
The Comptroller and Auditor General (CAG) of India released a report on Friday that reveals a significant and concerning decline in capital expenditure within Andhra Pradesh during the financial year 2024-25. The findings highlight serious fiscal management issues, with the state government spending a mere one percent of its Gross State Domestic Product (GSDP) on capital investments.
Substantial Shortfall in Budgeted Spending
The total capital expenditure for the year amounted to only ₹29,241 crore, which represents a drastic reduction from the budget estimate of ₹45,382 crore. This substantial shortfall indicates a failure to meet planned investment targets for infrastructure and asset creation. The actual capital expenditure figure stood at ₹16,141 crore for 2024-25, further emphasizing the gap between projected and realized spending.
Comparison with Previous Government Regime
Curiously, the report notes that the current National Democratic Alliance (NDA) government spent considerably less on capital expenditure compared to the previous Yuvajana Sramika Rythu Congress Party (YSRCP) regime. This shift in spending priorities raises questions about the continuity of development projects and long-term economic planning.
Misuse of Borrowed Funds Raises Red Flags
The CAG report raises serious concerns regarding the utilization of borrowed funds by the state government. Typically, governments borrow primarily for capital or asset creation that generates long-term economic benefits. However, the audit observed that only 24 percent of Andhra Pradesh's borrowings during 2024-25 were allocated to capital expenditure.
Against total borrowings of ₹87,773 crore during the year, the state allocated a mere ₹21,173 crore for capital expenditure. This indicates that a substantial portion of the borrowed funds was diverted to finance revenue expenditure, including day-to-day administrative expenses and operational costs.
Growing Dependence on External Financing
The report further highlights the state's increasing reliance on external financing. Borrowings increased by 16.08 percent against the previous year, while spending on asset creation declined by 12 percent during the same period. This inverse relationship between borrowing and investment creates a precarious fiscal situation.
Warning About Fiscal Sustainability
The CAG report issues a stern warning about the persistent shift from capital to revenue expenditure, coupled with rising borrowings to meet operational expenses. This pattern raises serious concerns about fiscal discipline and long-term financial sustainability. The diversion of borrowed funds from productive investments to routine expenses undermines the state's economic growth potential and creates future debt burdens without corresponding asset creation.
The audit findings suggest that Andhra Pradesh needs to reassess its spending priorities and ensure that borrowed funds are channeled toward productive capital investments that can generate economic returns and support sustainable development.
