AP announces a mega budget of ₹3.32 lakh crore, a third of it to be borrowed

The Andhra Pradesh government on Saturday presented a mega ₹3.32 lakh crore Budget for 2026-27 , combining an expansive welfare push with development spending, while openly acknowledging the strain on state finances and a continued heavy dependence on borrowing.

Of the total outlay, nearly one third of the Budget will be funded through loans , underscoring the fiscal stress confronting the state. As per Budget estimates, Andhra Pradesh plans to raise about ₹76,000 crore through open market borrowings and around ₹19,000 crore as loans from the Centre , taking total borrowings for the year close to ₹95,000 crore .

Presenting the Budget in the Assembly, Finance Minister Payyavula Keshav said the state was still “yet to come out of the woods” financially, following years of accumulated stress on public finances. The Budget size is around ₹10,000 crore higher than the previous financial year . Revenue expenditure is estimated at ₹2.56 lakh crore , while capital expenditure is pegged at nearly ₹54,000 crore .

The government has projected a revenue deficit of about ₹22,000 crore , which amounts to 1.11 per cent of the Gross State Domestic Product (GSDP) . The GSDP for 2026-27 has been pegged at ₹19.75 lakh crore .

Debt burden and borrowing trajectory

The Budget pegs public debt at ₹7.11 lakh crore in 2026-27 , up from ₹6.35 lakh crore in FY26 . Analysts clarified that this figure reflects public debt alone , as defined in the Budget documents. When borrowings and liabilities of state owned corporations, special purpose vehicles and other off budget entities are factored in, the overall debt burden is estimated by analysts to approach ₹10 lakh crore , highlighting the scale of Andhra Pradesh’s fiscal challenge.

The debt trajectory has become a key point of political and economic scrutiny. While public debt rose by around ₹2.5 lakh crore over the five years between 2019 and 2024 , recent estimates indicate that borrowings raised in the first three years of the current administration are already approaching that level , raising concerns about the pace at which liabilities are accumulating.

Budget documents show that Andhra Pradesh continues to rely on borrowing not only to fund capital expenditure but also to bridge the gap between revenue receipts and committed spending on welfare schemes, salaries, pensions and interest payments.

Revenue mix under pressure

For 2026-27, the state has estimated revenue receipts of about ₹2.34 lakh crore . This includes tax revenue of around ₹1.90 lakh crore , non tax revenue of roughly ₹11,500 crore , and grants in aid from the Centre of about ₹32,000 crore . The remaining portion of the Budget is financed through borrowings and limited capital receipts.

State GST, excise on liquor, sales tax on fuel, stamp duty and registration charges form the bulk of the state’s own tax revenue. Non tax revenue, which includes fees, royalties, dividends and interest receipts, continues to account for a relatively small share of overall income.

While the government has stressed efforts to improve revenue mobilisation, critics point out that higher power tariffs, increased registration charges, water and service fees, and various cesses have added to the burden on households and businesses, even as borrowing remains high.

Welfare remains the centrepiece

Welfare schemes continue to dominate the expenditure profile of the Budget. The government has earmarked ₹27,719 crore for the NTR Bharosa pension scheme , which provides ₹4,000 per month to eligible beneficiaries. The Thalliki Vandanam scheme, offering ₹15,000 per annum per school going child , has been allocated ₹9,668 crore , while Annadata Sukhibhava , which provides ₹20,000 per year to farmers , has received ₹6,600 crore .

The Deepam 2.0 scheme, which offers free LPG cylinders, has been allocated ₹2,601 crore , while ₹1,420 crore has been set aside for Stree Shakti , the free bus travel scheme for women. Power subsidies for weaker sections account for ₹600 crore .

Major departmental allocations include ₹51,021 crore for the Backward Classes component , ₹32,308 crore for School Education , ₹19,306 crore for Health, Medical and Family Welfare , and nearly ₹23,000 crore for Panchayati Raj and Rural Development , headed by Deputy Chief Minister Pawan Kalyan .

Development and capital spending

On the development side, the government highlighted an economic master plan for the Visakhapatnam Economic Region , built around seven growth drivers and 41 high impact projects with a proposed investment of ₹28,000 crore , including metro rail projects. The Budget also announced plans to establish an Andhra Pradesh Wealth Fund , with a seed corpus of ₹100 crore , aimed at leveraging state assets and building long term financial capacity.

Administrative sanction has been accorded for 97 works worth ₹57,868 crore in the greenfield capital Amaravati, following steps initiated by the Centre to accord statutory status to the capital city.

Infrastructure allocations include nearly ₹10,000 crore for major irrigation projects , ₹6,105 crore for the Polavaram project , and ₹1,927 crore for the Rashtriya Krishi Vikas Yojana . The rural employment guarantee programme under the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Grameen has been allocated ₹8,365 crore , while ₹5,451 crore has been set aside for urban and rural housing. An additional ₹4,000 crore each has been earmarked for Dr NTR Vaidya Seva Trust and the Jal Jeevan Mission .

Fiscal tightrope

The Budget speech acknowledged that the state is still grappling with the cumulative impact of fiscal stress built up over the years. While the government has sought to project confidence through sustained welfare spending and ambitious development plans, the numbers underline a delicate balancing act.

With nearly one third of the ₹3.32 lakh crore Budget funded through borrowings , and total liabilities once broader public sector debt is included nearing ₹10 lakh crore , Andhra Pradesh’s fiscal path will depend heavily on its ability to boost revenues, contain deficits and manage debt more prudently in the years ahead.