Editorial. States of change

In Andhra Pradesh and Odisha, there has been a major political churn. In the former, the spectacular comeback of 74-year-old N Chandrababu Naidu to the driving seat should come as a relief to the Bharatiya Janata Party (BJP). He adds 16 crucial parliamentary seats to the NDA’s kitty. Naidu’s Telugu Desam Party (TDP) has also won 135 seats in the 175-member Andhra Pradesh Assembly. In Odisha, the BJP has decimated Naveen Patnaik’s Biju Janata Dal which has been in power for almost 25 years.

Naidu, once famous as “CEO of Andhra Pradesh” who pioneered economic reforms and modernisation, has a lot to prove in his new avatar as a welfarist. Naidu has had to airbrush his earlier image as the hard-nosed reformist who brought in ‘smart governance’ in the 1990s because that single-minded focus on IT-led growth cost him an election in 2004. In the last decade or so, Naidu was faced with the welfarist governance model of YS Jagan Mohan Reddy. These had to be politically neutralised by Naidu’s own “Super Six” schemes that included vast benefits for farmers, school children, three free gas cylinders annually, among other promises. Jagan Mohan Reddy lost the Assembly and Parliamentary elections despite his welfarist pitch.

Indeed, Naidu is saddled with the political burden of continuing the welfare measures, even as Andhra Pradesh’s finances are a bit shaky. According to the Reserve Bank of India’s December 2023 report on State Finances, AP’s fiscal deficit was budgeted at 3.8 per cent of GSDP for FY24 (a revenue deficit of 1.5 per cent). This is above the prevailing fiscal deficit level for all States, at 3.1 per cent of GSDP in FY24 (and a 0.1 per cent revenue deficit for all States). Its outstanding liabilities at 35.2 per cent of its GSDP, too are way above the States’ average of 27.6 of GSDP. With off-Budget borrowings and contingent liabilities, this figure would exceed 50 per cent. It is against this backdrop of climbing deficits that he intends to build a capital city. For those extra funds, Naidu is likely to push once again for special status for the State with respect to finances (an assurance that came about after the creation of Telangana). He quit the NDA over this issue in 2018, and since then the matter has been hanging fire — since the Fourteenth Finance panel questioned the ‘special states’ concept after enhancing States’ share in its devolution formula. Ultimately, Naidu and the Centre need each other for financial and political reasons, respectively -- an inter-dependence that could keep the alliance going.  

In Odisha, BJP has seized power with a simple majority of 78 in the 147-member Assembly. With an ageing Patnaik and decimated Congress, the BJP hardly faces any real opposition. Odisha’s finances are robust, with outstanding liabilities at 13.9 per cent of GSDP, and a fiscal deficit of 3 per cent of GSDP in FY24 (budgeted); the revenue surplus for FY24 is as high as 3.1 per cent. There is elbow room for capital expenditure and social welfare schemes. Both States are in for major changes.