Govt. cautioned against excessive borrowings

By Our Special Correspondent

HYDERABAD, JUNE 6. Noted economists and leaders of various political parties painted a dismal picture of the State's economy and cautioned the State Government against ``excessive borrowings'' and their usage for unproductive purposes.

Participating in a seminar on ``A P State's Economic Situation: Problems and Solutions,'' organised by the Chandra Rajeswara Rao Foundation for Social Progress, most of them could not figure out where these ``huge loans'' taken by the State Government were going. Their refrain was there was nothing wrong in raising loans as long as these were used for creation of assets and generating employment benefiting the people, especially the poor. But this was not happening now.

Prof. Ch. Hanumantha Rao, former Member, Planning Commission, wondered why the State got stuck at a growth rate and per capita income much below the national average. All the hard economic indicators pointed to the pathetic condition of the State's economy.

The agriculture growth remained stagnant at two percent, just about the same rate as that of population growth. The growth rate of rice production of the State had fallen at an alarming rate from 2.5 per cent in the 1980s to 1.4 per cent now.

Even in terms of infrastructure development, the State fared badly. The index prepared by the Centre for Monitoring Indian Economy for rating the States in terms of availability of power, transport and irrigation facilities and human development, showed that Andhra Pradesh with 96 points was not only below the national average of 100 but many of the other States. Punjab scored 199, Kerala 151, Tamil Nadu 144, Haryana 141 and Gujarat 122. Given this infrastructure, the investment share attracted by the State was a poor 7.2 per cent against Gujarat's 13.5 per cent and Maharashtra's 21 per cent.

The only aspect that could be compared favourably with other States was fiscal deficit which was 29 per cent. Referring to the subsidy, he wanted the debate to be on how to extend it to deserving sections and removing the undeserving ones from the bracket, for which ``we need a strong political will.''

Prof. D. Narasimha Reddy of the Hyderabad Central University taking 1994 as the bench mark, the per capita income rose only by 2.5 per cent after that year in the case of AP compared to 3.7 per cent for other States. The development in AP was not phenomenal as is being made out, with the annual growth rate of 5 percent was less than the national average of 6 percent. The figures for Gujarat and Maharashtra being 9 per cent and 8 per cent.

But referring to the huge loans, he said the interest payment in proportion to the total debt was 16 per cent for AP, against the average of 17.5 per cent for the 14 other major States and 23 per cent in the case of West Bengal. Yet the difference was in the growth rate which was not significant in AP. This meant that the loan amounts were going into unproductive areas.

Mr. V. Hanumantha Rao, senior journalist, spoke of how the Union Finance Minister Mr. Yashwanth Sinha, gave a ``fiscally sound certificate'' to Karnataka, saying it had not approached him for any assistance. ``We have never heard of such certificate being given to AP.'' He said going by the poor management of economy, the present Government did not deserve any public support to stay in office.

Mr. B. P. R. Vithal, Member of the Tenth Finance Commission, said the State's economy was not as bad as it was being made out. ``Never in its history has it topped. Like in the past it continues to be among the top five or six. The only cause of concern is the huge loans taken by the Government, which nobody knows where these are going.''

The political leaders views were on the familiar lines. Mr. K. Rosaiah senior Congress leader, quoted the Comptroller and Auditor-General's report to say that the increase in non-plan expenditure rose from 81 per cent to 91 per cent while the plan expenditure had come down from 19 per cent to 8 percent, during the last five years. Of the 365 days in a year, the Government survived on borrowings for 220 days. It was not a healthy sign.

He clarified that the criticism was not political. Nor was it for toppling the Government. It was intended at making the Government take corrective steps.

Mr. P. Venugopala Reddy, general secretary of the State BJP, said the State's economy was dangerously poised with heavy borrowings. He wondered whether the State was getting in or out of debt trap. There was need for prioritising the areas which badly needed resources.

Mr. B. V. Raghavulu, secretary, CPI(M) State Committee, said the rich had become richer and the poor poorer after the economic reforms and the huge borrowings. Land reforms was the only alternative but the World Bank loan is preferred as it came easily.

Mr. Suravaram Sudhakar Reddy, Secretary of the CPI State Council, said there was no response from the Government when he wanted it show one example of a country or a state which had made progress by depending on World Bank loans. Mr. Dasari Nagabhushana Rao, general secretary of the foundation, welcomed.

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