ANDHRA PRADESH has spent Rs 1.05 lakh crore on human resource (HR) expenditure in 2025-26, with employee-related costs consuming 95 per cent of the state's own revenue (SOR), according to Chief Minister N. Chandrababu Naidu's progress report on state finances for 2024-26.
Presenting the report on August 4, Naidu described the state's HR expenditure as a longstanding structural challenge. He linked the situation to the aftermath of the 2014 bifurcation of Andhra Pradesh and policy decisions taken during the previous YSR Congress Party (YSRCP) administration.
The figures have sparked debate, with the Opposition disputing the government's calculations and employee unions questioning the methodology used to assess the burden.
State finances under pressure from employee-related costs
According to the report, Andhra Pradesh spent Rs 105,039 crore on salaries, pensions and other personnel-related payments during 2025-26.
Naidu said the state's HR expenditure remains significantly higher than several neighbouring states when measured against own revenue collections. Key comparisons cited in the report include:
- Andhra Pradesh: HR expenditure at 95% of SOR
- Karnataka: 28% of SOR
- Telangana: 44% of SOR
- Tamil Nadu: 49% of SOR
- Kerala: 68% of SOR
The chief minister said the ratio had averaged 110% of SOR during the YSRCP government between 2019 and 2024, compared with an average of 87% during his previous term between 2014 and 2019.
He said the government had reduced the average ratio to around 96% over the past two financial years, though he acknowledged the burden remains substantial.
Government links challenge to bifurcation and workforce expansion
Naidu said Andhra Pradesh inherited a difficult fiscal structure after the creation of Telangana in 2014.
According to the state government's assessment, Andhra Pradesh retained only around 46% of the resources of the undivided state while serving approximately 58% of the population.
Speaking to India Today, Peeyush Kumar, Principal Secretary in the Finance Department, said the state's economy underwent major structural changes after bifurcation.
He noted:
- Agriculture's share of the economy rose from 24% in 2013-14 to 33% in 2025-26
- The services sector's share declined from 51% in 2013-14 to 43% in 2025-26
- The state's SOR-to-GSDP ratio fell from 8.7% in 2013-14 to 6% in 2024-25
Officials maintain these shifts weakened revenue generation capacity while expenditure commitments continued to rise.
Breakdown of the Rs 1.05 lakh crore expenditure
According to Kumar, the state pays salaries, pensions and related benefits to an average 1.3 million beneficiaries every month. The expenditure covers:
- Regular government employees
- Pensioners
- Grant-in-aid institution employees
- Professionals and wage workers
- Contract and outsourced staff
- Employees of local bodies
- Staff of certain government corporations, including the state road transport corporation
Kumar said 67% of beneficiaries are regular employees, while 25% are pensioners.
He also highlighted welfare-related commitments, including payments to ASHA workers and anganwadi workers, as contributors to the overall expenditure profile.
Opposition and unions challenge government estimates
The Opposition YSRCP has rejected Naidu's interpretation of the figures.
Duvvuri Krishna, a member of the party's political advisory committee and former special secretary (finance) in the chief minister's office during the YSRCP administration, said the government's presentation was misleading.
He said HR expenditure had risen sharply during the Covid-19 period because revenue collections were severely affected. According to him, the ratio had already declined to around 98% by 2024 as the economy recovered.
Employee organisations have also questioned the government's calculations.
Bopparaju Venkateswarlu, chairman of the Andhra Pradesh Joint Action Committee Amaravati, cited 2025-26 Comptroller and Auditor General figures and said salaries and pensions accounted for 59.36% of SOR and 47.64% of total revenue receipts, substantially lower than the government's stated HR burden.
Union representatives have also renewed demands for pay revision and settlement of pending dues.
Fiscal balancing act remains in focus
The debate over Andhra Pradesh's HR expenditure comes as the state pursues large-scale development projects, including the rebuilding of Amaravati as the capital city.
The government has recently increased the retirement age for employees of public sector undertakings, corporations and societies to 62 years, aligning it with the retirement age applicable to state government employees.
Officials view expenditure management as central to improving fiscal sustainability, while employee groups continue to seek resolution of salary-related demands and arrears. How the state balances workforce costs with development spending is likely to remain a key policy issue in the coming years.