For the first time in nine years, the Andhra Pradesh government on Saturday presented a tax-free, surplus budget for the financial year 2003-04. The budget shows a nominal surplus of Rs 33.77 crore (Rs 337.7 million) for the year even as the total expenditure is estimated at a whopping Rs 43,480 crore (Rs 434.8 billion).

It is the ninth Budget presented by the Telugu Desam government since it regained power in 1995. However, it is for the first time that a surplus budget has been introduced by the government.

Finance Minister Yanamala Ramakrishnudu said that during the financial year 2003-04, the state government has programmed an expenditure of Rs 30,305 crore (Rs 303.05 billion) under non-plan and Rs 13,175 crore (Rs 131.75 billion) under plan. This would result in a revenue deficit of Rs 2,131 crore (Rs 21.31 billion), which would work out to 1.17 per cent of the gross state domestic product.

Fiscal deficit is expected to come down marginally to Rs 7,338 crore (Rs 73.38 billion) in the next fiscal year compared to Rs 7,341 crore (Rs 73.41 billion) in the current year (revised estimate).

Primary deficit, too, is slated to come down to Rs 414 crore (Rs 4.14 billion) next year from Rs 1,284 crore (Rs 12.84 billion) in the current year.

After taking into account the overall transactions of the year, the state would have a net deficit of Rs 13.74 crore (Rs 137.4 million).

The financial year is expected to end with a positive balance of Rs 33.77 crore, taking into account positive opening balance for the year. However, it is obvious that this “feat” has been achieved by curtailing the budgetary outlay for the state plan for the current year by as much as Rs 1,300 crore (Rs 13 billion) as per revised estimates.

The Finance Minister claimed that the revenue and fiscal deficit in the ensuing financial year would be lower than the revised estimates for the current fiscal year 2002-03. He indicated that the state's debt would soar to Rs 57,141 crore (Rs 571.41 billion) by the end of the year 2003-04.

"One of the concerns voiced by many experts is the rapid rise in the overall debt position of the state government," he said and pointed out that the outstanding debt rose from Rs 35,651 crore (Rs 356.51 billion) in 2000-01 to Rs 42,492 crore (Rs 424.92 billion) in 200-02. It is likely to go up to Rs 57,141 crore (Rs 571.41 billion) by the end of 2003-04.

However, in terms of debt as percentage of GSDP, the corresponding figures for successive years worked out to 25.62 per cent in 2000-01, 28.31 per cent in 2001-02 and 30.25 per cent in 2002-03 and an estimated 31.32 per cent in 2003-04.

"The growth rate of debt as per cent of GSDP in 2001-02 was 11.76 per cent over the previous year."

For 2002-03, this growth has drastically come down to only 6.89 per cent over the previous year, and it is further estimated to come down to 3.54 per cent in 2003-04.

Ramakrishnudu contended that Andhra Pradesh was in a relatively better position compared to other states.

The state debt curve, he said, would peak out at 32.6 per cent in 2004-05 and show a downward trend thereafter.

"We need not be unduly alarmed, as the government will continue to be very careful and prudent in its debt management, to ensure compliance with its own targets in the next few years," he assured.

He said the central transfers by way of tax devolution and grants have declined from 5.2 per cent of the GSDP in 1995-96 to a likely 4.89 per cent in 2002-03.

On the other hand, state's own revenues have gone up from 6.32 per cent of GSDP in 1995096 to an estimated 9.74 per cent in 2002-03 and likely to reach 10.13 per cent in 2003-04.

"The state is fully prepared to introduce value-added tax in lieu of sales tax from April 1, 2003. The government expects full compensation from the central government to cover likely losses in 2003-04 on account of transition to VAT regime," he added.

The finance minister said that the state government has managed to bring down the establishment cost as a percentage of total revenue receipts from 48.75 per cent in 2000-01 to 43.04 per cent in 2001-02. This is estimated to go down further to 36.32 per cent in 2003-04. It was targeted to bring it down to 35 per cent by the fiscal year 2005-06.

He said that though the revenue deficit soared in absolute terms, it has come down from 2.58 per cent of GSDP in 2001-01 to 1.92 per cent in 2001-02 and estimated to further go down to just 1.17 per cent by 2003-04.

"Our medium term fiscal framework target is to eliminate revenue deficit altogether by 2005-06. I am confident that we will be able to achieve this goal," he asserted.

Ramakrishnudu said that the state has achieved considerable improvement in public expenditure management through constant monitoring done electronically.  While last year, the state had drawn upon the RBI's overdraft facility for 173 days, this year, the state government had gone into overdraft for only18 days till December 2002.

He said the state plan budget (normal state plan plus centrally sponsored schemes) for the year 2003-04 has been programmed with an outlay of Rs 13,175 crore (Rs 131.75 billion) as against the budgeted outlay of Rs 11,299 crore (Rs 112.99 billion) for 2002-03. However, the revised estimate for the current year is Rs 9,998 crore (Rs 99.98 billion).