Maharashtra’s rising fiscal deficit would grow further with the government Thursday making additional spending provisions. In its last budget before the Assembly polls, the government increased allocations for expenditure from Rs 2,13,462.32 crore estimated in the interim budget presented in February this year to Rs 2,24,056.63 crore.
Though Finance Minister Ajit Pawar estimated an increase in the total revenue from his February projections, the budget document reveals that this increase was mainly riding on the expectation that the Central assistance in the form of grant-in-aid will rise from the initially estimated Rs 17,545 crore to Rs 27,957.61 crore.
In fact, estimates of the share of state’s own tax and non-tax revenue in total income have dropped from 55.55 per cent to 52.94 per cent, and from 6.33 per cent to 6.03 per cent, respectively. While the state’s fiscal policy statement claimed that efforts were being made to keep revenue expenditure under check, the budget shows almost 86 per cent of the additional provisions have gone towards revenue expenditure.
Pawar defended the move: “The national economy is under recession that has left an adverse effect on tax collections. But the recession may deepen further if government expenditure was curtailed drastically.” He added: “The expenditure curve may have to be maintained even with somewhat higher debt. At the same time, higher debt would have a negative effect on the financial stability. I have attempted to balance concerns of growth and stability, while attempting to give a push to the economy to meet growing expectation of the public.”
Heavy expenditure on account of natural calamities besides decisions to extend subsidies in power and borne additional fiscal burden while implementing provisions of the Food Security Act had resulted in the state missing its revenue and fiscal targets in 2013-14.
Last year, while initial projections were for a revenue surplus budget, these unanticipated expenditures resulted in a revenue deficit of Rs 3,000 crore. Similarly, while the initial target was to maintain the fiscal deficit within 1.57 per cent of the gross state domestic product (GSDP), this target too was missed with the latest Economic Survey report revealing that the fiscal deficit rose 93.3 per cent over last year.
Pawar had earlier estimated that the fiscal deficit would rise to 1.8 per cent of the GSDP in 2014-15. Following the additional budgetary allocations on Thursday, this estimate was further scaled up to 1.87 per cent. While the state finance department has said this was still within the prudential norm of 3 per cent, the rolling targets set out in the fiscal strategy statement indicate that this deficit would only rise during two subsequent financial years.
Claiming that the unusual spells of hailstorms and subsequent rainfall in several parts of the state had intensified the burden on the state’s treasury, the department said: “The Indian Meteorological Department has recently forecast below average rainfall this year… The water scarcity could further enhance the burden.”
To meet the additional expenditure, Pawar has projected a further increase in open market borrowings and liabilities, even as he said these were well within the borrowing limit fixed for Maharashtra by the Centre. The state now has plans to raise Rs 31,022.15 crore through borrowings, overshooting the initial projections for the year, which hovered around Rs 30,000 crore. Last year, the state had raised Rs 23,600 crore through borrowings.
Almost 60 per cent of the revenue receipts realised in 2014-15 are projected to go towards meeting salaries, pensions, and interest payments. The government has also pointed a not-so-rosy picture of the state’s economy in the near future. “The growth will continue to be below potential and employment gains, especially in developed countries, will remain weak at best.”