Hyderabad: The 16th Finance Commission, in its main report for the 2026-2031 period presented by Union finance minister Nirmala Sitharaman on Sunday, has flagged Telangana as one of the country’s highest subsidy-spending states, underlining mounting fiscal pressures alongside strong income indicators.According to the report, Telangana’s per capita subsidy expenditure stood at ₹16,460 in 2023-24, placing it among the top three states nationwide. The state also accounted for 9% of the total accumulated losses of state-run electricity distribution companies during the same year, reflecting its sizeable share in the country’s power sector stress.
The commission said that unconditional transfers formed a significant part of the state’s spending pattern, with over 10% of revenue expenditure devoted to such transfers in 2018-19. Telangana’s flagship Rythu Bandhu scheme was cited as one of the largest cash transfer programmes in the agricultural sector in 2023-24, contributing substantially to the state’s subsidy outgo. Per capita incomeOn the positive side, the report highlighted that Telangana recorded the highest per capita income among India’s large states. However, this economic strength has been accompanied by a steady rise in debt. The state inherited a debt-to-GSDP ratio of 18.7% in 2014-15, which increased to 25% in 2019-20, peaked at 29.9% in 2020-21, and stood at 27.3% in 2023-24. The commission observed that Telangana’s fiscal deficit crossed the 3% mark in most years since 2015-16, barring one exception. While the Covid-19 period marked a peak in debt levels followed by some moderation, the ratio in 2023-24 remained nearly eight percentage points higher than in 2011-12. The report also noted that, except for a few years, Telangana generally maintained a revenue surplus, even as its fiscal deficit stayed elevated. Fiscal autonomyIn terms of fiscal autonomy, Telangana and Haryana stood out in 2023-24, with around 80% of total receipts generated from their own revenues, indicating lower reliance on central devolution and grants. However, the commission pointed out that per capita devolution to Telangana declined under the 15th Finance Commission compared with the 14th Finance Commission, adding to long-term fiscal challenges, including in the power sector.
