The Union government and Reserve Bank of India are keenly observing the developments in the newest of the country as Telangana puts up its maiden budget of Telangana with over ambitious estimate of expenditure. There is a yawning gap of Rs. 52,018 crore between the whopping expenditure of Rs 1,00,638 crore and total income, which includes tax revenue (Rs 35,378 crore) and non-tax revenue (Rs 13, 242 crore).
The government will have to depend a lot on the market borrowings in order to meet the expenses projected in the budget. However the borrowings need to be well above the permissible levels of borrowings and Telangana government has wrote to the center to relax the norms for the new state.
However both the Center and RBI are not flexible to Telangana’s demands as the government has to take the blame of this grave situation since it is going on announcing too many populist schemes. It is said that instead of allowing unlimited borrowings, Center and RBI emphasized on resource mobilization through effective tax collection.