TG among States significantly dependent on WMA despite being revenue surplus, says CAG

The Comptroller and Auditor General of India (CAG) has expressed concern over the government’s significant dependence on Ways and Means Advances (WMA) and loans from the Reserve Bank of India to cover short-term mismatches between revenue and expenditure.

Telangana was among the three States, namely Rajasthan and Andhra Pradesh, to benefit from 62% of the total WMA, including overdraft, during 2023-24. The CAG report stated that the duration of WMA usage in Telangana was 349 days, indicating almost continuous dependence throughout the year.

The state government had a revenue surplus during the financial year but benefited from WMA, indicating that the mismatch between inflows and outflows of revenues led to dependence on WMA. States’ continued reliance on Road and Vehicle Advances, including those with revenue surpluses, points to cash flow management challenges. “In many States, this trend underscores persistent fiscal pressures, shrinking State budget flexibility and the need for prudent debt management practices to ensure long-term sustainability,” the CAG said in its ten-year analysis of State finances.

Telangana, along with Chhattisgarh, Karnataka, Maharashtra, Rajasthan and Uttar Pradesh, witnessed a significant increase in fiscal deficit in 2023-24 compared to the previous fiscal.

The state was among 18 other countries running a fiscal deficit of 3.41% of GDP in 2023-24. This is the 15th century. It was against the 3% fiscal deficit target set by the Finance Commission for the province’s fiscal consolidation.

However, the State was successful in controlling the revenue deficit by generating revenue surplus during the fiscal period. Telangana, along with six other states, has targeted zero revenue deficit and achieved revenue surplus by the end of 2023-24. Domestic debt was another concern, remaining the largest component of Government borrowing. Domestic debt of all States increased by 229% between 2014-15 and 2023-24, and the increase was uneven across the State. Telangana (376%) along with Assam (428%), Chhattisgarh (423%) and Sikkim (364%) reported the highest increase in domestic debt in the last decade.