In 1998, as part of the “Andhra Pradesh Economic Restructuring Project” (APERP), the Andhra Pradesh government secured a loan of ₹2,200 crores from the World Bank. This financial assistance was intended to drive economic reforms and structural adjustments within the state.
The implementation of these reforms was guided by the recommendations of the World Bank. The Telugu Desam Party (TDP), which was in power at the time, endorsed these reforms, leading to the cancellation of many existing welfare schemes. The focus shifted towards economic liberalization and attracting private investments, significantly altering government spending priorities.
A notable shift in government expenditure was observed. The state government facilitated infrastructure and mechanisms to attract private investments, leading to a decline in welfare spending across various sectors. While funding for primary education remained relatively stable, there were significant cuts in allocations for health, higher education, medical care, agriculture, and irrigation.
Subsidies were also affected by these reforms. The price of subsidized rice for the poor was increased from ₹2 per kg to ₹3.50 per kg, and the allocation per family was reduced by 25%. These measures not only increased the cost of living for the economically weaker sections but also added to the public debt burden, failing to ease the state’s financial pressures as intended.
Over a period of five years, the interest rate on government debt rose sharply, leading to a surge in the financial deficit from 3.2% to 5.5%. This further strained the state’s finances and resulted in increased dependence on external borrowing.
One of the major consequences of these economic reforms was the neglect of rural development. The shift in government focus towards private sector-led growth resulted in a decline in public investment in social sectors, worsening the condition of rural populations. This led to deterioration in essential services, particularly in agriculture, healthcare, and rural employment opportunities.
Additionally, the reforms led to increased regional inequalities within Andhra Pradesh. Private investments were predominantly concentrated in already developed urban centers, leaving economically weaker regions behind. This disparity was particularly evident between the Telangana region (excluding Hyderabad) and Coastal Andhra, where the latter experienced more benefits from economic development.
Thus, while economic reforms in Andhra Pradesh aimed at liberalization and growth, they also resulted in deepened economic disparities and increased financial burden on the general public, particularly in the less-developed regions of the state.