LOKESH

SANKALP (BATCH-2)

APPSC Group I - Mains Answer Writing Program – 2025

PAPER – IV
21-03-2025

ECONOMY AND DEVELOPMENT OF INDIA AND ANDHRA PRADESH

Unit 3: Resource mobilization in Andhra Pradesh – Budgetary resources and constraints -

Fulfillment of the conditions of A.P Bifurcation Act – central assistance and issues of conflict - public
debt and projects of external assistance - Physical resources - Mineral and forest resources – Water
disputes with neighboring states

Unit – 3

1. Analyze the trends in the Andhra Pradesh state's expenditure Budget for
2025-26 with respect to revenue expenditure, capital outlay, and
underspending in previous years.

2. Analyze the fiscal health of Andhra Pradesh for 2025-26 concerning

deficits, outstanding debt, and compliance with FRBM targets.

3. Discuss the status of forest resources of Andhra Pradesh and the

initiatives taken for their conservation and management.

4. Discuss the key Ongoing Externally Aided Projects (EAPs) in Andhra

Pradesh. Analyze their financial progress and challenges in
implementation.

5. The division of assets and liabilities between Andhra Pradesh and

Telangana continues to be a point of contention. Discuss the legal and
constitutional mechanisms available to resolve such inter-state disputes.

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1. Analyze the trends in the Andhra Pradesh state's expenditure Budget for
2025-26 with respect to revenue expenditure, capital outlay, and
underspending in previous years.

Introduction
The Andhra Pradesh Budget 2025-26 reflects the state’s financial strategy,
emphasizing revenue expenditure, capital outlay, and correcting past
underspending trends. With a projected GSDP of ₹18.3 lakh crore, the budget
aims to boost infrastructure, social welfare, and fiscal management while
addressing implementation challenges.
Body:
Expenditure Budget for 2025-26:
1. Revenue Expenditure: Increasing Recurring Liabilities
Revenue expenditure refers to non-asset-creating expenses that are necessary
for government operations.
Key Trends in 2025-26
● The total revenue expenditure for 2025-26 is ₹2,51,163 crore,
marking a 12% increase over the revised estimate of 2024-25.
● Major components include:
○ Salaries, pensions, and interest payments (committed liabilities).
○ Subsidies and grants for welfare programs.
● The rise in revenue expenditure indicates an emphasis on
administrative and welfare expenses, but it also limits fiscal
flexibility for developmental spending.
2. Capital Outlay: Boosting Infrastructure Development
Capital outlay is the investment in asset creation, including roads, irrigation
projects, and public infrastructure.
Key Trends in 2025-26
● The capital outlay is estimated at ₹40,636 crore, reflecting a 69%
increase over the previous year.
● Major sectors with increased allocations:

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○ Irrigation & Flood Control: ₹6,991 crore increase.
○ Water Supply & Sanitation: ₹1,855 crore increase.
○ Rural Development: ₹1,489 crore increase.
● The rise in capital expenditure indicates renewed efforts toward
infrastructure expansion.
3. Underspending in 2023-24 and 2024-25: Persistent Fiscal Challenges
Underspending occurs when actual expenditure falls short of budgetary
allocations, leading to inefficiencies in public service delivery.
Extent of Underspending
● 2024-25: Net expenditure is projected to be 8% lower than budgeted.
● 2023-24: Total expenditure was 9% lower than the budgeted
estimates.
Sectoral Underspending Trends
● Agriculture witnessed the highest underspending, with 51% of the
allocated funds unutilized in 2024-25, followed by 38% underspending in
2023-24. This trend reflects poor fund absorption capacity and possible
delays in agricultural subsidies and support programs.
● Irrigation & Flood Control faced a 39% budget shortfall in 2024-25
and 42% in 2023-24, indicating execution delays in large-scale water
projects and infrastructure works.
● Rural Development saw 24% underspending in 2024-25 and 19% in
2023-24, pointing to inefficiencies in fund allocation and delays in
welfare schemes for rural communities.
● Welfare of SC, ST, OBC & Minorities experienced 19% underspending in
2024-25, slightly lower than 16% in 2023-24, suggesting continued
challenges in reaching marginalized populations effectively.
Conclusion
The Andhra Pradesh budget for 2025-26 reflects a push toward
infrastructure investment, with a significant increase in capital outlay (69%)
and revenue expenditure (12%). However, historical underspending trends
and a high proportion of committed expenditure pose serious challenges.
To ensure fiscal sustainability, the state must improve fund utilization,
rationalize expenditure, and enhance revenue generation. A balanced

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approach to managing committed liabilities, addressing underspending,
and improving infrastructure execution will be crucial for long-term
economic growth and development.

Additional information
Challenges in Capital Expenditure
● Execution bottlenecks: In 2024-25, capital outlay was 26% lower than
budgeted, indicating delays in fund utilization.
● Sectoral underspending: In 2024-25, irrigation and flood control saw a
shortfall of ₹5,884 crore, while rural development faced a ₹1,142 crore
reduction.
● Dependence on loans: The state is providing ₹6,131 crore in loans and
advances, including ₹1,491 crore for irrigation and ₹1,945 crore for
urban development, raising concerns over fiscal sustainability.

2. Analyze the fiscal health of Andhra Pradesh for 2025-26 concerning

deficits, outstanding debt, and compliance with FRBM targets.
Introduction
Andhra Pradesh's fiscal health in 2025-26 reflects rising deficits, growing debt,
and increasing committed expenditure, posing financial challenges. Despite
efforts toward fiscal consolidation, the state struggles with high deficits and
outstanding liabilities, raising concerns about long-term sustainability and
adherence to FRBM targets while balancing development and welfare priorities.
Body:
Fiscal health of Andhra Pradesh for 2025-26:
Revenue Deficit: Higher Borrowing for Operational Expenses
● The revenue deficit for 2025-26 is projected at ₹33,186 crore (1.8% of
GSDP), indicating that the state is borrowing for non-asset creating
expenses like salaries, pensions, and subsidies.
● In 2024-25, the revenue deficit stood at 3% of GSDP, significantly
higher than the initial estimate of 2.1% due to a 12% shortfall in
revenue receipts.

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Fiscal Deficit: Rising Government Borrowing
● The fiscal deficit for 2025-26 is projected at 4.4% of GSDP, exceeding
the 3% FRBM limit set for states.
● In 2024-25, the fiscal deficit was 4.6% of GSDP, higher than the
budget estimate of 4.2%, primarily due to lower revenue collections.
Borrowing Space and Central Assistance
● The central government permits an additional borrowing limit of
0.5% of GSDP for states implementing power sector reforms.
● Andhra Pradesh is also eligible for a 50-year interest-free loan from the
central government, providing additional fiscal space for capital
expenditure.

Outstanding Debt and Contingent Liabilities

Rising Debt Burden
● The outstanding debt for 2025-26 is projected at 35% of GSDP, a
significant increase from 31.5% in 2021-22.
Contingent Liabilities: Risk from Public Sector Guarantees
● As of March 2024, Andhra Pradesh’s contingent liabilities (government
guarantees for State Public Sector Enterprises - SPSEs) stand at
₹1,54,797 crore (10.8% of GSDP).

Conclusion
The fiscal health of Andhra Pradesh for 2025-26 indicates serious financial
challenges, with a high fiscal deficit (4.4% of GSDP), increasing outstanding
debt (35% of GSDP), and growing committed expenditure (65% of revenue
receipts in 2022-23). Persistent revenue shortfalls and declining capital
expenditure further weaken the state’s ability to sustain economic growth.
According to NITI Aayog’s Fiscal Health Index (2025), Andhra Pradesh ranks
17th among 18 states, highlighting severe fiscal challenges. Declining capital
expenditure, rising committed liabilities, and slower revenue growth have
further exacerbated financial stress. To ensure fiscal sustainability, the state
must focus on enhancing revenue generation, optimizing expenditure, and
implementing structural reforms.

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Additional information
Fiscal Health Concerns Raised by NITI Aayog
The NITI Aayog Fiscal Health Index (2025) ranked Andhra Pradesh 17th
out of 18 states, citing severe financial stress. The key concerns highlighted
include:
Declining Capital Expenditure
● Between 2018-19 and 2022-23, Andhra Pradesh’s capital expenditure
on:
○ Social services fell by 84% (health, education, and welfare
programs).
○ Economic services fell by 60% (infrastructure, irrigation, and
transport).
Rising Committed Expenditure
● The share of salaries, pensions, and interest payments in total revenue
receipts increased from 58% in 2018-19 to 65% in 2022-23.
Slower Revenue Growth
● The growth rate of Andhra Pradesh’s own tax and non-tax revenue
declined from 17% in 2018-19 to 10% in 2022-23.
● A shrinking revenue base increases dependence on borrowings,
worsening the fiscal situation.

3. Discuss the status of forest resources of Andhra Pradesh and the

initiatives taken for their conservation and management.
Introduction
Andhra Pradesh's diverse forest ecosystems, spanning the Eastern Ghats,
Nallamala Hills, and Godavari and Krishna river basins, are crucial for
ecological stability, biodiversity, and economic development. They provide
timber, bamboo, fuel, fodder, and medicinal plants, while regulating climate,
air quality, and water flow. As carbon sinks, they play a key role in climate
change mitigation.
Body:
Status of Forest Resources in Andhra Pradesh:

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As per the Indian State of Forest Report (ISFR) 2023, Andhra Pradesh has
38,436.58 sq. km of forest area, covering 23.59% of the state’s
geographical area. The classification is as follows:
● Very Dense Forest(Areas with canopy density of 70% and above):
1,995.71 sq. km
● Moderately Dense Forest(Canopy density between 40% and 70%):
13,725.75 sq. km
● Open Forest(Canopy density between 10% and 40%): 14,363.50 sq. km
● Scrub Forest(Canopy density below 10%): 8,351.62 sq. km
Key Government Initiatives for Forest Conservation and Management:
1. State Forest Development Agency (SFDA) & National Afforestation
Program (NAP)
The SFDA coordinates various afforestation and conservation programs,
including:
● National Afforestation Programme (NAP) and Green India Mission
(GIM) – Implemented under a 60:40 Centre-State funding model
since 2015-16.
● In 2023-24, ₹121 lakh was spent on maintaining plantations over 899
hectares.
● The Annual Plan of Operations (APO) for 2024-25 targets 1,670
hectares, with an outlay of ₹1,969.24 lakh.
Additionally, a five-year perspective plan (2024-29) for Srikakulam
and Paderu Divisions has been submitted with a proposed budget of
₹455.94 lakh.
2. Nagaravanams (Urban Green Spaces) & Temple Eco-Parks
To create green urban spaces and improve air quality, Andhra Pradesh
has developed:
● 37 Nagaravanams (City Forests), which provide eco-friendly
recreational spaces.
● 7 Temple Eco-parks, enhancing the natural environment around
historical temples.
● ₹103.70 lakh allocated for 2024-25 and ₹114.07 lakh proposed for
2025-26 for these projects.

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3. Nagar Van Yojana (NVY) – Green Cities Initiative
● The Government of India sanctioned 61 Nagar Vans from 2021-22
to 2024-25 to promote clean, green, and smart cities.
● ₹9,913.93 lakh released, out of which ₹5,248.64 lakh spent by
December 2024.
● This initiative focuses on urban afforestation, biodiversity
conservation, and community participation in forest restoration.
4. Social Forestry & Public Participation
The state has launched massive public-driven afforestation programs to
increase tree cover outside reserve forests. Key initiatives include:
● Distribution of seedlings to farmers and institutions.
● Avenue plantations along roads, highways, and public spaces.
● Community land plantations to boost rural livelihoods.
● In 2024-25, over 5.29 crore seedlings were planted under various
schemes, including:
- Vanamahotsavam – A public afforestation campaign involving all
government departments and communities.
- Vanam-Manam Program – Encouraging tree planting across
farmlands, community spaces, and urban areas.
5. Mixed Plantation Scheme (09-Mixed)
To further increase forest cover, the scheme includes:
● 87 km of avenue plantations in 2024-25.
● Maintenance of previous plantations with a budget of ₹450.86 lakh,
out of which ₹41.48 lakh spent by December 2024.
6. Afforestation & CAMPA (Compensatory Afforestation Management and
Planning Authority)
● Andhra Pradesh undertakes afforestation drives under CAMPA,
centrally-sponsored schemes, and state-funded programs.
● In 2024-25, 5.29 crore seedlings were planted, focusing on native
species like Teak, Red Sanders, Bamboo, Amla, Tamarind,
Eucalyptus, and Jamun.
Economic Importance of Forests: Revenue & Sustainable Use

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● The forestry sector generated ₹19.63 crore in revenue in 2024-25
(up to December 2024).
● Sustainable extraction of forest products is being encouraged to
balance economic development with conservation.

Conclusion
Andhra Pradesh is making significant strides in afforestation, forest
conservation, and sustainable resource management through state and central
government initiatives. Programs like Green India Mission, Nagar Van
Yojana, Vanamahotsavam, and Social Forestry ensure both ecological
conservation and economic sustainability.

4. Discuss the key Ongoing Externally Aided Projects (EAPs) in Andhra

Pradesh. Analyze their financial progress and challenges in
implementation.
Introduction
The Andhra Pradesh government is actively working on completing various
Externally Aided Projects (EAPs) that faced delays during the previous
administration. Many of these projects, supported by international financial
institutions, had funds diverted during the last five years, leading to delayed
loan disbursements. The current government is now trying to expedite these
projects to ensure timely completion.
Body:
Financial Progress:
As of December 2024, Andhra Pradesh has received ₹6,603 crore in external
loans, while an additional ₹13,919 crore is yet to be disbursed. The
government estimates that ₹7,155 crore in loans will be released over the
next five years, along with ₹3,000 crore in state funding. Apart from ongoing
projects, the state also needs to repay ₹12,625 crore (₹7,155 crore principal +
₹5,470 crore interest) between 2024-25 and 2029-30 at an interest rate of
6.08% to 7.04%.
Note: A separate Question on Ongoing Externally Aided Projects (EAPs) in
Andhra Pradesh can be asked:
Key Ongoing Externally Aided Projects (EAPs) in Andhra Pradesh:

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1. Andhra Pradesh Mandal & Rural Connectivity Project
○ Total Cost: ₹3,200 crore, aimed at improving connectivity between
mandals and rural areas.
○ Funding Agency: New Development Bank (NDB)
○ External Loan: ₹2,240 crore | State Share: ₹960 crore
○ Current Expenditure: ₹207 crore, indicating slow initial progress.
○ Expected Loan in Next 5 Years: ₹750 crore, subject to execution
milestones.
2. Andhra Pradesh Roads & Bridges Reconstruction Project
○ Total Cost: ₹3,200 crore to rebuild ageing and damaged road
infrastructure.
○ Funding Agency: New Development Bank (NDB)
○ Loan Component: ₹2,240 crore | State Share: ₹960 crore
○ Current Spending: ₹269 crore
○ Loan Anticipated by 2030: ₹750 crore, based on implementation
progress.
3. Andhra Pradesh Rural Roads Project
○ Total Cost: ₹4,234 crore – the largest EAP targeting rural
connectivity.
o Funding Agency: Asian Infrastructure Investment Bank (AIIB)
○ Loan Sanctioned: ₹2,963 crore | State Share: ₹1,270 crore
○ Loan Received: ₹908 crore
○ Total Expenditure: ₹1,515 crore, reflecting moderate execution.
○ Pending Loan: ₹2,055 crore | Next 5-Year Estimate: ₹1,200 crore
4. Irrigation & Livelihood Improvement Project
○ Total Cost: ₹2,000 crore to improve irrigation and farmer incomes.
o Funding Agency: Japan International Cooperation Agency (JICA)
○ Loan Sanctioned: ₹1,700 crore | State Share: ₹300 crore
○ Loan Disbursed So Far: ₹218 crore | Expenditure: ₹304 crore
○ Pending Loan: ₹1,481 crore | Expected Soon: ₹100 crore

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5. Integrated Irrigation & Agriculture Transformation Project
○ Total Cost: ₹1,600 crore – focuses on modernizing irrigation and
farm practices.
o Funding Agency: World Bank
○ Loan: ₹1,120 crore | State Share: ₹480 crore
○ Disbursed: ₹194 crore | Spent: ₹243 crore
○ Loan Yet to Come: ₹925 crore | Expected in 5 Years: ₹100 crore
6. Urban Water Supply & Septage Management Project
○ Total Cost: ₹3,723 crore – to strengthen drinking water and
sewage systems in towns.
○ Funding Agency: Asian Infrastructure Investment Bank (AIIB)
○ Loan Component: ₹2,606 crore | State Share: ₹1,117 crore
○ Loan Received: ₹333 crore | Spent: ₹446 crore
○ Pending Loan: ₹2,272 crore | Expected in 5 Years: ₹2,000 crore
7. Visakhapatnam–Chennai Industrial Corridor (VCIC)- Phase 1
○ Total Cost: ₹2,362 crore – key industrial infrastructure along the
eastern coast.
o Funding Agency: Asian Development Bank (ADB)
○ Loan Sanctioned: ₹1,617 crore | State Share: ₹745 crore
○ Loan Received: ₹1,298 crore | Expenditure: ₹1,340 crore
○ Only ₹318 crore pending; likely to be fully disbursed soon.
8. VCIC – Phase 2
○ Total Cost: ₹1,758 crore – continuation of industrial corridor
expansion.
o Funding Agency: Asian Development Bank (ADB)
○ Loan Committed: ₹1,155 crore | State Share: ₹603 crore
○ No loan released yet; ₹695 crore expected in next phase.
9. Health System Strengthening Program
○ Total Cost: ₹2,327 crore – 100% funded through external loan.
o Funding Agency: World Bank

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○ Loan Released: ₹2,273 crore
○ Pending: ₹54 crore – one of the most well-executed projects to
date.
10. Zero-Based Natural Farming Project
o Total Cost: ₹1,000 crore – promoting chemical-free agriculture.
o Funding Agency: World Bank
o Loan Portion: ₹700 crore | State Share: ₹300 crore
o Loan Received & Spent: ₹195 crore
o Pending Loan: ₹504 crore | Expected Soon: ₹300 crore
11. Supporting Andhra’s Learning Transformation (SALT)
o Total Cost: ₹1,853 crore – aims at improving school education
infrastructure.
o Funding Agency: World Bank
o Fully funded by external loan: ₹1,853 crore
o Loan Released: ₹947 crore
o Pending: ₹905 crore – to be disbursed over next few years.
Challenges & Financial Commitments:
1. Slow Loan Disbursement:
○ Most EAPs receive funds in phases, based on project progress.
○ Only ₹6,603 crore has been disbursed so far, while ₹13,919
crore is still pending.
2. High Debt Obligations:
○ Apart from ongoing projects, Andhra Pradesh has to repay
₹12,625 crore (including ₹5,470 crore in interest) over the next six
years.
3. Financial Burden on State Government:
○ The state must contribute ₹6,736 crore to complete these
projects.
4. Administrative Challenges:
○ Many projects faced delays in implementation and fund
allocation under the previous administration.

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Conclusion
Externally Aided Projects (EAPs) play a crucial role in Andhra Pradesh’s
infrastructure, irrigation, rural development, and healthcare sectors. The
government is now focusing on speeding up the execution of delayed
projects and ensuring timely loan disbursements. Efficient project
management and financial planning will be key to maximizing the benefits of
these international loans while balancing the state’s debt obligations.

5. The division of assets and liabilities between Andhra Pradesh and

Telangana continues to be a point of contention. Discuss the legal and
constitutional mechanisms available to resolve such inter-state disputes.
Introduction
The bifurcation of united Andhra Pradesh through the Andhra Pradesh
Reorganisation Act, 2014 gave rise to Telangana but left unresolved several
financial and institutional issues. Chief among them is the division of assets
and liabilities. A decade later, the dispute persists due to conflicting
interpretations, lack of political consensus, and delayed legal and
administrative resolution.
Nature and Status of the Disputes
● A total of 245 institutions are under contention — 142 under Schedule
IX and 103 under Schedule X of the Act.
● Their combined value is estimated at ₹1.42 lakh crore, a majority of
which is located in Hyderabad, now Telangana’s capital.
● Notable disputed assets include RTC headquarters, Deccan
Infrastructure and Landholdings Ltd. (DIL), and AP Bhavan in Delhi.
As of 2024:
● Telangana claims assets located in its territory are not subject to
division if not considered “headquarter assets.”
● Andhra Pradesh insists on a population-based division (58:42) in line
with Section 53 of the Act.
● Telangana also claims dues of ₹6,755 crore, while Andhra claims
₹3,800 crore from Telangana.
Recent Developments (2024–2025)

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● In July 2024, the Chief Ministers of both states held bilateral talks in
Hyderabad.
● Three committees were announced:
○ A Chief Secretary-level committee for core bifurcation issues.
○ A ministerial-level committee for political coordination.
○ A DGP/ADGP-level committee to address joint concerns like
cybercrimes.
These committees are expected to submit progress updates every two weeks,
signaling a renewed willingness to resolve long-pending issues through
cooperation.
Legal and Constitutional Mechanisms Available
1. Andhra Pradesh Reorganisation Act, 2014
○ Section 47–50: Detail the apportionment of assets, liabilities, and
employees.
○ Section 53: Provides guidance on "headquarter assets" and default
population-based division.
○ Section 81: Empowers the Union Government to give binding
directions to both states.
2. Expert Committees
○ The Sheela Bhide Committee, appointed by the Union Home
Ministry, recommended the phased division of Schedule IX
institutions. Telangana objected to key parts.
○ The committee submitted its report, but implementation has
stalled due to disagreements.
3. Dispute Resolution by the Centre
○ The Ministry of Home Affairs (MHA) convened 31 rounds of
meetings since 2014.
○ A fresh committee under the Joint Secretary (Centre-State
division) was set up in 2024 to chart ―practical ways‖ to resolve
the deadlock.
4. Supreme Court Intervention

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○ In December 2022, Andhra Pradesh approached the Supreme
Court under Article 131 (inter-state dispute), seeking resolution
for the asset division.
○ The case is under consideration; the Court’s decision may set a
precedent for future state bifurcations.
Challenges in Resolution
● Lack of trust between states despite legal frameworks.
● Ambiguity in definitions — e.g., what constitutes ―headquarter assets.‖
● Political transitions delayed decision-making and implementation of
expert recommendations.
● Centre’s limited enforcement — mostly advisory in nature, lacking
punitive authority.
Conclusion
The unresolved asset and liability dispute between Andhra Pradesh and
Telangana highlights the inadequacy of existing legal mechanisms when
political consensus is absent. While the Reorganisation Act and Supreme Court
offer constitutional avenues, resolution will ultimately depend on political
maturity, Centre’s proactive facilitation, and a spirit of cooperative
federalism. The renewed bilateral talks in 2024 offer a glimmer of hope that
both states may yet resolve their differences amicably.

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