VIJAYAWADA: Andhra Pradesh’s fiscal health has slipped to its lowest point in a decade, with the state scoring 23.1 in the Fiscal Health Index (FHI) 2026 and ranking 17th among the 18 major states in the country. The score reflects a state struggling to balance ambitious welfare and infrastructure commitments with weak revenue generation and rising debt.

The decline marks a sharp fall from Andhra Pradesh’s best performance in 2014-15, when it ranked 3rd nationally. Its average ranking slipped to 11th during 2014-17, with a score of 37.9 and further to 15th during 2017-20, with a score of 26.5.

According to the recently released NITI Aayog FHI 2026 report for the financial year 2023-24, the pace of debt accumulation in Andhra Pradesh is raising serious concerns over the state’s long-term fiscal sustainability. Based on the FHI report, Andhra Pradesh has been classified as an ‘Aspirational’ state, indicating significant fiscal stress and structural weaknesses. Although the state has shown some improvement in the quality of expenditure, it continues to remain near the bottom of the national rankings due to high debt and widening deficits.

The state’s total liabilities rose sharply between 2019-20 and 2023-24, underlining mounting financial pressure. Over the five-year period, liabilities grew by over 50%, with a compound annual growth rate of around 12.7%.

Andhra Pradesh’s debt stock-to-GSDP ratio stood at 33% in 2023-24, significantly higher than the average of 28.3% recorded across 18 major states.

Its debt burden is also reflected in debt servicing indicators. Interest payments accounted for 16.2% of revenue receipts, exceeding the all-state average of 13.4%.

The report also points out that a substantial share of borrowings is being used to finance revenue expenditure rather than capital creation, raising concerns over the long-term productivity of debt.

AP’s Debt Sustainability lowest in the country

In the Debt Index, Andhra Pradesh ranked 13th with a score of 36.6, placing it in the ‘Performer’ category. However, its Debt Sustainability score of 4.2 is among the lowest in the country.

The State also continues to struggle to meet fiscal consolidation targets under the Fiscal Responsibility and Budget Management (FRBM) framework. In 2023-24, Andhra Pradesh recorded a revenue deficit of Rs 38,683 crore, amounting to 2.68% of GSDP. Its fiscal deficit widened to Rs 62,720 crore, or 4.35% of GSDP, breaching the prescribed ceiling of 4%.

In the Fiscal Prudence Index, Andhra Pradesh ranked 16th with a score of 9.9, placing it in the ‘Aspirational’ category.

The state also performed poorly in revenue generation. In the Revenue Mobilization Index, Andhra Pradesh ranked 16th with a score of 21.7. However, it fared better in the Quality of Expenditure Index, where it ranked 12th with a score of 43.1, earning the “Front Runner” tag.

This suggests that despite fiscal stress, the state is making relatively better use of available resources by directing spending towards social and economic sectors.

Still, the report notes that Andhra Pradesh suffers from low own-revenue ratios and high dependence on Union transfers, weakening its revenue mobilization performance. In 2023-24, own tax revenue accounted for around 52% of total revenue receipts, registering a 48% increase over five years.

Among the major contributors, Taxes on Commodities and Services accounted for 35.5%, while Goods and Services Tax contributed 34.1%.

However, non-tax revenue made up only about 3% of total receipts and remained heavily dependent on mining-related income, which contributed 41.2% of the non-tax component, exposing the state to sector-specific risks.

Despite these constraints, Andhra Pradesh has maintained a strong focus on developmental expenditure, especially in welfare and infrastructure sectors such as education, health, housing, irrigation and energy. The state’s total developmental expenditure rose by nearly 65% over five years, increasing from Rs 1.01 lakh crore in 2019-20 to Rs 1.67 lakh crore in 2023-24.

A major structural concern, however, is the weight of committed liabilities. Nearly 48.59% of total revenue expenditure is being absorbed by salaries, pensions and interest payments, leaving limited fiscal space for discretionary and growth-oriented spending.

Speaking to TNIE, economist Pentapati Pullarao said Andhra Pradesh appears to be moving in the right direction in terms of the quality of expenditure, which is particularly significant in the post-bifurcation context.

He said Andhra Pradesh had traditionally been fiscally stronger but lost momentum after the 2014 bifurcation. Unlike states such as Chhattisgarh, Uttarakhand, Jharkhand and Telangana, which emerged out of long-standing regional aspirations and had stronger urban anchors or pre-existing growth centres, Andhra Pradesh became a residual state without such an advantage.

“Andhra Pradesh was not a willing entity in that sense. It had to start over and rebuild its growth model. So the state now has to catch up and find new ways to develop,” he said.

This story has been written by BSN Malleswara Rao of The New Indian Express.