State Dept plays a crucial role in determining the state's financial health.According to Economic Survey Andhra Pradesh state debt is over 2.25 lakh crore that is 29% of states GDP. This staggering high amount of state debt pushing state into Financial debt trap that affect the state both socially and economically.
Reasons behind high debt
1. Impact of bifurcation: Unjust and an equitable manner of state bifurcation had put Andhra Pradesh into Grave economic crisis finance commission estimated Andhra Pradesh has 22113 crore revenue deficit on post bifurcation.
---- lack of capital and loss of revenue generation as much of revenue is coming from Hyderabad.
---- as a result of bifurcation a Andhra Pradesh has to incur huge capital expenditure to diversify the state's economy on Industrial and service sectors which requires huge finances and borrowings.
2. Low tax to GDP ratio: This is another important reason for high debt of Andhra Pradesh as Andhra Pradesh has remained and agrarian state with less development of industry and service sector
3. Financial mis management In 2.25 lakh crores. debt 60% of share that is 1.6 lakh crore is from market borrowings this debt has not been spent on capital expenditure which has potential for skill and infrastructure development that would have resulted in increase revenue generation capacity..
4. Miss Governance of previous government: entire debt has gone funding for revenue expenditure diversification of funds to populist schemes high rates of corruption
Measures to handle hi debt
1. Increase tax base To enhance tax base and tax effort by expanding use resources on infrastructure development is needed.
2. Controlling revenue expenditure : by cutting administrative cost tracking revenue leakages minimising transaction cost and rationalising tax structure
3. Leveraging state demographic dividend: state should utilise its abundant natural resources and long coastal resources combined it with valued human resource by focusing more on education skill development nutrition and Employment generation.
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