Telangana Tops In Urban Development Funding: RBI Report
“Demographic Transition in India – Implications for State Finances”: Reports
HYDERABAD: Telangana has emerged as one of the four states recording the highest allocation towards urban development, reflecting the growing pressure on housing, transport and civic infrastructure arising from rapid population expansion in urban areas, according to a report released by the Reserve Bank (RBI) of India.
The RBI’s annual publication, 'State Finances: A Study of Budgets’, which analyses state finances from 2023-24 (actuals) to 2025-26 (budget estimates), focused this year on the theme “Demographic Transition in India – Implications for State Finances” and highlighted how changing population structures are increasingly shaping fiscal priorities.
The report noted that states were at varying stages of demographic transition, broadly classified as youthful, intermediate and ageing, based on the proportion of population aged 60 years and above. Telangana fell in the intermediate category, with 10.1 per cent of its population above 60 years in 2016, rising to 11.1 per cent in 2021, 12.5 per cent in 2026 and 14.5 per cent in 2031.
It is projected to enter the ‘ageing’ category by 2036, when the elderly population is expected to touch 17.1 per cent. This shift is significant as ageing states face narrowing tax bases and rising fiscal pressure from pensions, healthcare and social security, while youthful and intermediate States still have an opportunity to leverage a relatively larger working-age population.
Telangana’s development expenditure has shown a strong upward trend, increasing from ₹1,62,738 crore in 2023-24 to ₹2,03,029 crore in 2024-25 and further to ₹2,34,506 crore in 2025-26.
The report places Telangana alongside Chhattisgarh, Uttar Pradesh and Gujarat as states with the highest allocations towards urban development. It observed that youthful and intermediate States typically allocate around 16 per cent of their social sector spending to urbanisation, compared to only about 7 per cent in ageing states, consistent with their younger demographic profile and faster pace of urban growth.
For intermediate states like Telangana, education continued to command the largest share of social sector expenditure, followed by pensions, urbanisation, health and social security, although the share of spending on urbanisation, health and social security has risen significantly over time.
In contrast, non-development expenditure declined from ₹56,544 crore in 2023-24 to ₹45,894 crore in 2024-25 before rising modestly to ₹50,320 crore in 2025-26. This pattern indicates a greater focus on capital formation and growth-oriented spending.
The report also flagged concerns about the state’s growing reliance on borrowings. Telangana’s gross market borrowings rose from ₹40,150 crore in 2022-23 to ₹49,618 crore in 2023-24 and are projected to increase further to ₹56,209 crore in 2025-26.
The maturity structure of state government securities (SGS) has been undergoing a gradual elongation, with a growing share of bonds having maturities beyond 10 and 15 years. Telangana is among the few states, along with Kerala, Tamil Nadu and Jammu and Kashmir, that have consciously issued SGS with maturities exceeding 20 years.
In Telangana’s case, securities with less than one-year maturity account for 4.6 per cent, those between one and five years for 13.3 per cent, five to ten years for 12.3 per cent, ten to twenty years for 41.6 per cent, and above twenty years for 28.2 per cent, reflecting a strategy of spreading repayment obligations over a longer horizon.
The RBI has also highlighted concerns regarding debt sustainability. A substantial portion of Telangana’s borrowings has been used for servicing past loans and interest payments, with 70 per cent of borrowings in 2023-24, 56 per cent in 2024-25 and 49 per cent in 2025-26 earmarked for this purpose. The state has also extended guarantees for borrowings by various corporations, pushing guaranteed liabilities to ₹2,41,528 crore by March 2025 as per revised estimates.
The debt-to-GSDP ratio, which should ideally remain below 25 per cent under the FRBM Act, has already crossed the limit, reaching 28.8 per cent in 2021 and around 28 per cent in 2022, and is projected at 27.5 per cent in 2025-26.
The RBI warned that due to extensive long-term borrowings, Telangana will face a substantial repayment burden, with principal repayments of ₹3,63,883 crore scheduled between 2025 and 2064, apart from interest obligations.