one-year-on-naidu-walks-the-tight-rope

The revival of Amaravati, the dream capital city project, restoration of investor confidence and an accelerated flow of central funds due to friendly political dispensation at the Centre have been the key highlights of the TDP-led NDA government in Andhra Pradesh, as it completes one year in office on June 4.

 

However, severe financial crunch poses a major challenge for Chief Minister N Chandrababu Naidu, as he struggles to strike a balance between welfare and development and mobilise resources to fulfil poll promises and fund the ambitious projects that are integral to his Vision-2047.

 

The NDA coalition, comprising the TDP, BJP and Jana Sena Party, stormed to power in 2024 with an unprecedented mandate, bagging 164 of the 175 Assembly seats, and 21 of the 25 Lok Sabha seats.

 

Naidu, a four-time Chief Minister who weathered many a political storm in the past, will have to marshal all his skills and experience to steer the state out of choppy waters. The ‘investor-friendly’ image, focused approach on governance, fiscal reforms and tough anti-corruption measures are Naidu’s major strengths.

 

However, managing finances could be a daunting task. The 2025-26 budget projects a public debt of Rs 1.03 lakh crore, with off-budget borrowings at Rs 5 lakh crore, reflecting fiscal profligacy of the previous regime headed by the YSR Congress Party.

 

AP’s fiscal challenges remain formidable and Naidu does not wield a magic wand. The state’s fiscal deficit of Rs 79,926 crore (4.38% of GSDP) exceeds the RBI’s recommended 3% threshold, with cumulative debt at 35% of GSDP. High debt servicing costs (Rs 44,000 crore annually) and off-budget liabilities constrain fiscal flexibility.

 

Realising the capital dream

Prime Minister Narendra Modi re-launching the works on Amaravati, the ultra-modern capital city in Vijayawada-Guntur region, last month sent out a strong political message. A brainchild of Naidu, the river-front capital project was abandoned by his bete noir YS Jagan Mohan Reddy who was at the helm from 2019 to 2024.

 

Soon after coming to power in June last year, Naidu has been relentlessly working on reviving his dream project and also secured loans from the World Bank as well as other financial institutions. Being a crucial ally of the NDA government, he also has solid backing from the Centre in executing the ambitious project.

 

Phase I of Amaravati, comprising 92 projects, is estimated to cost Rs 64,910 crore. This includes infrastructure, housing, government buildings and 19 iconic structures, such as the Assembly building, a signature bridge, an NTR statue, a riverfront road along the Krishna and major highway linkages.

 

Fast-tracking Polvaram irrigation project, considered the lifeline of AP, is also credited to Naidu’s pro-active approach.

 

Promises versus reality

 

After taking over the reins, the NDA government prioritised infrastructure and development to restore the state’s economic standing post-bifurcation.

The much-touted poll promises called ‘Super Six’ ran into rough weather as the government grappled with depleting coffers. Only one of the six manifesto promises—providing three free LPG cylinders per year to eligible families—could be fulfilled initially.

 

In fact, Naidu appeared before the media and admitted that the poor financial situation, inherited by his government, made it impossible for him to implement all the poll promises at once. Instead, they would be implemented in phases as and when the financial position improved, he assured.

 

The ‘Super Six’ promises are: Unemployment allowance of Rs 3,000 per month for jobless youth; annual financial support of Rs 15,000 for underprivileged women to help them educate their children; Rs 20,000 per annum as financial assistance for eligible farmers; Rs 1,500 per month to eligible women; three LPG cylinders each for eligible families per year; and free travel for women in Andhra Pradesh State Road Transport Corporation (APSRTC) buses.

Focus on flagship projects

 

Though the financial position of the state is not very encouraging, Naidu has accelerated progress on flagship projects like the Amaravati and Polavaram. The government has secured central support for both the projects and is determined to complete Polavaram by December 2028.

 

Naidu’s emergence as a crucial ally of the NDA 2.0 has proved beneficial for the state. For instance, his negotiations ensured financial backing for the Vizag Steel Plant, which he described as ‘a historic moment etched in steel’.

 

The government’s “Vision-2047” document outlines a long-term strategy for sustainable development, with initiatives like ‘WhatsApp Governance’ enhancing transparency. Additionally, investments from global players like Google in Visakhapatnam signal a business-friendly environment, bolstered by Modi’s assurance of taxation stability.

 

“With people’s blessings, we shall herald a new era of prosperity under the leadership of the Prime Minister,” Naidu said. The coalition’s unity has strengthened TDP’s position both regionally and nationally, giving Naidu leverage in coalition negotiations.

 

Central bonanza

 

AP has secured significant central support, including over Rs 50,000 crore (4 per cent of Andhra’s GDP) in the 2024-25 Union Budget, with Rs 15,000 crore for Amaravati and funding for Polavaram.

 

Presenting the 2025-26 budget, the state Finance Minister P Keshav cited a NITI Aayog report, which pointed out that Andhra Pradesh has reached a zero-debt sustainability stage. He, however, explained the efforts being taken to increase revenue by 12 per cent through tax compliance and subsidy rationalisation.

 

Continued focus on Amaravati and Polavaram, alongside investments from global players like Google, could cement TDP’s development-oriented image. However, the major red flag is the state’s zero-debt sustainability rating, which restricts borrowing, forcing reliance on central funds and PPP models.

 

Stagnant tax revenues and high interest costs limit fiscal manoeuvrability, with revenue receipts falling short of expenditure needs. However, Naidu appears confident of navigating the turbulent waters. But delays are inevitable in implementing welfare schemes as the fiscal situation remains grim. The government’s ability to navigate these challenges hinges on Naidu’s political management skills, ability to leverage central support and enhance revenues.