Paper I · 6 Telangana Economy & Development · 6.1 Growth, structure and public finance
6.1.2 State finances and the budget: revenue, spending, debt and the latest budget (2026-27)
Telangana's 2026-27 budget plans to spend Rs 3,24,234 crore, keeps the fiscal deficit at 3% of GSDP with a small revenue surplus, and spends most on rural development, education, agriculture and the six guarantees, while debt stays near 29% of GSDP (higher if off-budget loans are counted).
- TGPSC MPSO / ASO · Paper I
- Standard level
- 14 min read
- Free
Core facts
- Budget 2026-27 presented on 20 March 2026 by Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka.
- Earlier budgets: 2024-25 (full budget, July 2024) Rs 2,91,159 crore; 2025-26 (19 March 2025) Rs 3,04,965 crore.
- Total expenditure: Rs 3,24,234 crore (2025-26 budget: Rs 3,04,965 crore; rise ≈ 6.3%).
- Revenue expenditure: Rs 2,34,406 crore. Capital expenditure (capital outlay): Rs 47,267 crore.
- Revenue surplus: Rs 6,858 crore (≈ 0.3% of GSDP).
- Fiscal deficit: Rs 58,459 crore = 3.0% of GSDP (2025-26 RE: 3.2%, above the 3% budgeted).
- Own tax revenue: Rs 1,48,186 crore; non-tax revenue: Rs 35,730 crore.
- Largest own tax: SGST (about 35% of own taxes).
- Highest department allocation: Panchayat Raj and Rural Development, Rs 33,688 crore.
- Six guarantees: Rs 50,713 crore in all; Rythu Bharosa Rs 18,000 crore, Cheyutha pensions Rs 14,861 crore.
- Outstanding liabilities: about 28.7% of GSDP (2026-27 BE).
- Total debt including off-budget loans and guarantees: about Rs 8 lakh crore (Rs 8,00,805 crore on 31 December 2025, state government report, March 2026).
- Sixteenth Finance Commission (2026-31): Telangana's share of central taxes 2.174% (15th FC: 2.102%).
- First Telangana budget: 5 November 2014, by Finance Minister Etela Rajender, about Rs 1,00,637 crore (for 10 months of 2014-15).
Explained
1. Budget words in one place
- Revenue receipts: taxes, non-tax income (fees, dividends, mining royalty, land sales), share in central taxes and central grants. They create no liability.
- Revenue expenditure: spending that creates no asset (salaries, pensions, interest, subsidies, scheme transfers).
- Capital expenditure (capital outlay): spending on assets (irrigation projects, roads, buildings).
- Revenue balance = revenue receipts − revenue expenditure. A plus figure is a revenue surplus.
- Fiscal deficit = total expenditure (excluding debt repayment) − receipts other than borrowings. It is what the state must borrow in a year.
- Primary deficit = fiscal deficit − interest payments.
- BE = budget estimate; RE = revised estimate (mid-year); Actuals = audited.
2. Budget 2026-27 at a glance (Rs crore)
| Item | 2025-26 RE | 2026-27 BE |
|---|---|---|
| Total expenditure | 2,81,339 | 3,24,234 |
| Revenue receipts | 2,03,971 | 2,41,264 |
| Revenue expenditure | 2,03,380 | 2,34,406 |
| Capital outlay | 36,481 | 47,267 |
| Revenue surplus | 591 | 6,858 |
| Fiscal deficit (% GSDP) | 56,133 (3.2%) | 58,459 (3.0%) |
| Primary deficit | 36,764 | 37,154 |
(From the state budget documents.)
- Capital outlay rises about 30% over 2025-26 RE, led by irrigation (Rs 12,836 crore), welfare departments and roads.
- Borrowings planned: about Rs 79,984 crore (including Rs 5,500 crore of central capex loans). Debt repayment: Rs 23,025 crore. Interest: Rs 21,304 crore. Expenditure excluding debt repayment: Rs 3,01,209 crore.
3. Where the money comes from (revenue receipts Rs 2,41,264 crore)
| Source | Rs crore | Share |
|---|---|---|
| State's own taxes | 1,48,186 | ≈ 61% |
| State's own non-tax revenue | 35,730 | ≈ 15% |
| Share in central taxes | 33,182 | ≈ 14% |
| Grants from the Centre | 24,166 | ≈ 10% |
- Own resources = about 76% of revenue receipts; central transfers = about 24%. Telangana relies on its own taxes more than most states.
- Own taxes, 2026-27 BE: SGST Rs 52,490 crore (≈ 35%), sales tax/VAT (mainly on petrol, diesel and liquor) Rs 38,106 crore (≈ 26%), state excise Rs 27,668 crore (≈ 19%), stamps and registration Rs 19,541 crore (≈ 13%), motor vehicle tax Rs 8,814 crore (≈ 6%).
- Watch-point: central grants are budgeted at more than twice the 2025-26 RE (Rs 11,161 crore). Revenue receipts fell short of the budget by about 24% in 2024-25 and 22% in 2023-24 (budget 2026-27).
4. Where the money goes: biggest department allocations (2026-27)
| Department | Rs crore |
|---|---|
| Panchayat Raj and Rural Development | 33,688 |
| Education | 26,674 |
| Agriculture and farmers' welfare | 23,179 |
| Irrigation | 22,615 |
| Energy | 21,285 |
| Municipal Administration and Urban Development | 17,907 |
| Medical and Health | 13,679 |
| BC Welfare | 12,511 |
| SC Welfare | 11,784 |
- Other allocations: ST Welfare Rs 7,937 crore; Minority Welfare Rs 3,769 crore; Women and Child Welfare Rs 3,143 crore; Housing Rs 7,430 crore; Animal Husbandry Rs 1,529 crore; Industries Rs 3,490 crore; IT Rs 875 crore.
- Six guarantees (Rs 50,713 crore; about 21% of revenue receipts; 2025-26 budget estimate reported as about Rs 56,083 crore):
| Scheme | 2026-27 (Rs crore) |
|---|---|
| Rythu Bharosa (Rs 12,000 per acre a year) | 18,000 |
| Cheyutha pensions | 14,861 |
| Indiramma houses | 5,500 |
| Mahalakshmi free bus travel for women | 4,305 |
| Bonus on fine (sanna) paddy | 3,500 |
| Gruha Jyothi (200 units free power) | 2,080 |
| Rajiv Aarogyasri | 1,143 |
| Rs 500 gas cylinder | 723 |
| Indiramma Atmiya Bharosa (landless labour) | 600 |
- Rythu Bharosa, Cheyutha, Indiramma houses and Mahalakshmi take about 85% of the six-guarantee money. (Scheme details: TGP-GU-01.)
- New in 2026-27: Indiramma Family Life Insurance (Rs 5 lakh insurance cover for every family; to start in June 2026), a cashless health scheme for government employees and pensioners, a CM Breakfast scheme (pre-primary to Intermediate), mid-day meals extended to government junior colleges, the CM Overseas Employment Programme, Rs 500 crore for 100 Telangana Public Schools, Rs 1,000 crore for Osmania University, Rs 1,886 crore to restart crop insurance, and Rs 500 crore for the Godavari Pushkaralu (2027).
5. Debt
- On-budget outstanding liabilities: about 28.3% of GSDP (2025-26 RE) and 28.7% (2026-27 BE).
- Growth of debt: about Rs 72,658 crore (14.4% of GSDP) in 2014-15; about Rs 3.9 lakh crore (27.8%) by 2023-24 BE (from budget documents).
- Off-budget borrowing: loans taken by state corporations and special purpose vehicles (for example the Kaleshwaram Irrigation Project Corporation) with state guarantees. They are not in the budget's debt figure but are often repaid from the budget.
- State government report (March 2026): total debt including such loans and guarantees Rs 8,00,805 crore on 31 December 2025. Between December 2023 and December 2025 the state borrowed about Rs 3,19,179 crore and repaid about Rs 3,04,202 crore (principal plus interest).
- Outstanding guarantees on loans of state public sector enterprises: about Rs 2,41,743 crore (about 14% of GSDP) on 28 February 2026 (budget 2026-27).
6. Rules and the Centre
- FRBM: Telangana follows the Fiscal Responsibility and Budget Management Act, 2005 (the Andhra Pradesh Act of 2005, adapted after 2014). The fiscal-deficit norm is 3% of GSDP; the Sixteenth Finance Commission also recommends 3% for 2026-31.
- Central capex loans (50-year interest-free loans to states for capital works): Rs 5,500 crore in 2026-27; they are kept outside the borrowing ceiling.
- Finance Commission shares of the divisible pool: 2.437% (14th FC, 2015-20) → 2.102% (15th FC, 2021-26) → 2.174% (16th FC, 2026-31; chair Arvind Panagariya). The states' total share stays 41%.
- 16th FC grants to Telangana (2026-31): Rs 11,548 crore for urban local bodies, Rs 9,968 crore for rural local bodies and Rs 2,774 crore for disaster management (budget 2026-27). The 16th FC dropped revenue-deficit, sector-specific and state-specific grants.
Common traps
- ✗ "Budget 2026-27 was presented by the Chief Minister." ✓ By Deputy CM and Finance Minister Mallu Bhatti Vikramarka (20 March 2026).
- ✗ "Telangana's 2026-27 budget is Rs 3.04 lakh crore." ✓ That was 2025-26 (Rs 3,04,965 crore); 2026-27 is Rs 3,24,234 crore.
- ✗ "The budget shows a revenue deficit." ✓ A revenue surplus of Rs 6,858 crore; the fiscal deficit is Rs 58,459 crore (3%).
- ✗ "Irrigation gets the largest department allocation." ✓ Panchayat Raj and Rural Development (Rs 33,688 crore); irrigation Rs 22,615 crore.
- ✗ "State excise is the largest own tax." ✓ SGST (≈ 35%), then VAT/sales tax, then excise.
- ✗ "Telangana's 16th FC share is 2.102%." ✓ 2.174%; 2.102% was the 15th FC share.
- ✗ "Rythu Bharosa got Rs 50,713 crore." ✓ Rs 50,713 crore is all six guarantees; Rythu Bharosa is Rs 18,000 crore.
- ✗ "Telangana's first budget was presented in June 2014." ✓ On 5 November 2014 by Etela Rajender (about Rs 1.01 lakh crore).
Quick revision
- 2026-27 budget: Rs 3,24,234 crore; 20 March 2026; Bhatti Vikramarka.
- Revenue exp Rs 2,34,406 cr; capital outlay Rs 47,267 cr (+30%).
- Revenue surplus Rs 6,858 cr; FD Rs 58,459 cr = 3.0% of GSDP (2025-26 RE 3.2%).
- Own tax Rs 1,48,186 cr (SGST ≈ 35% largest); non-tax Rs 35,730 cr.
- Own resources ≈ 76% of revenue receipts; central transfers ≈ 24%.
- Top departments: PR&RD 33,688 > Education 26,674 > Agriculture 23,179 > Irrigation 22,615.
- Six guarantees Rs 50,713 cr; Rythu Bharosa 18,000; Cheyutha 14,861.
- Liabilities ≈ 28.7% of GSDP (BE); total incl. off-budget ≈ Rs 8 lakh crore (Dec 2025).
- FC share: 14th 2.437% → 15th 2.102% → 16th 2.174% (2026-31).
- First budget: 5 Nov 2014, Etela Rajender, ≈ Rs 1,00,637 crore.
Go deeper: Deeper, Mains writing (beyond what TGPSC MPSO / ASO usually asks)
Deeper Advanced
- Committed expenditure (salaries, pensions, interest) was about 55% of revenue receipts in 2024-25 (budget 2026-27). Interest alone was about 17% of revenue receipts in 2024-25; it is budgeted at about 9% in 2026-27 (Rs 21,304 crore of Rs 2,41,264 crore). This fall rests on the receipts estimate coming true.
- Debt restructuring: the state reports restructuring of about Rs 25,612 crore of high-cost loans (budget 2026-27), which lowered interest; interest fell from about 17% of revenue receipts (2024-25) to about 9% (2025-26 RE). Debt repayment (Rs 23,025 crore) plus interest (Rs 21,304 crore) in 2026-27 is about Rs 44,329 crore.
- Fiscal history (from budget documents; 2024-25 and 2026-27 from the 2026-27 budget):
| Year | Fiscal deficit (% GSDP) | Revenue balance (% GSDP) |
|---|---|---|
| 2014-15 | 1.9 | +0.1 |
| 2016-17 | 5.4 (UDAY year) | +0.2 |
| 2020-21 | 5.2 | −2.3 (COVID) |
| 2024-25 (actual) | 3.0 | −0.6 |
| 2026-27 (BE) | 3.0 | +0.3 |
- In 2016-17 the deficit jumped largely because the state took over power-distribution (DISCOM) debt under the Centre's UDAY scheme.
- Subsidies and transfers rose from about 3% of GSDP (2017-18) to 5.2% (2024-25); the power subsidy grew about 21% a year from 2018-19 to 2025-26 (budget 2026-27). Most of it is free power to farm pump sets.
- Sector spending (2026-27 BE): welfare of SC/ST/OBC/minorities Rs 34,883 crore is now the largest sector; agriculture and allied Rs 25,686 crore (slightly below 2025-26 RE).
- Statement-level points.
- The highest department allocation is Panchayat Raj and Rural Development, not irrigation or agriculture.
- The largest own tax is SGST, not excise.
- Fiscal deficit 3.0% with a revenue surplus means borrowing is meant to fund capital works, not day-to-day spending.
- The 16th FC raised Telangana's share slightly (2.102% → 2.174%); the 15th FC had cut it from 2.437%.
Mains writing Mains writing
- Frame: Telangana's public finances combine a strong own-tax base with heavy welfare promises and high debt; the 2026-27 budget tries to protect capital spending while staying within the 3% deficit norm.
- Strengths:
- About 76% of revenue receipts from own resources; SGST and VAT grow with the economy.
- Revenue surplus budgeted; capital outlay up about 30%.
- FD at 3% of GSDP, in line with the Finance Commission norm.
- Concerns:
- Debt: on-budget liabilities near 29% of GSDP; about Rs 8 lakh crore with off-budget loans (SEO 2026).
- Optimistic receipts: shortfalls of 22–24% in recent years; central grants budgeted at more than double.
- Committed spending and subsidies squeeze money for new assets.
- Under-spending: in 2025-26 (RE) grants from the Centre were 51% below the budget estimate and the revenue surplus 78% below it (budget 2026-27).
- Way forward: realistic revenue estimates, a cap on guarantees to state corporations, better targeting of subsidies (power, welfare), and a medium-term debt path.
- Data to quote: Rs 3,24,234 crore; FD Rs 58,459 crore (3.0%); revenue surplus Rs 6,858 crore; capex Rs 47,267 crore; liabilities 28.7%; six guarantees Rs 50,713 crore.
- Model opening line: "Telangana has the revenue base of a rich state and the debt profile of a stretched one; its budget is a balancing act between welfare guarantees and fiscal room."
Practise this topic. Questions on Growth, structure and public finance, with answers explained.
All Growth, structure and public finance notes · TGPSC MPSO / ASO syllabus · TGPSC ASO Paper I Mock 1 with answers · Start free
Medha AI writes its own notes and checks them against the sources listed. Medha AI is an independent preparation service. It is not affiliated with, endorsed by or connected to APPSC, TGPSC (formerly TSPSC), MPSC, UPSC or any other commission or government body.