Fadnavis report card: No big bang economic changes yet

The forecast is that this debt stock will top Rs 3.56 lakh crore by next March, a rise of 18 per cent since 2014-15.

Written by Sandeep A Ashar | Mumbai | Published:October 28, 2016 8:08 pm
maharahstra, maharashtra news, maharashtra development, devendra fadnavis, congress news, mahrashtra economy CM Devendra Fadnavis at his residence in Malabar Hills on Monday. (Express Photo by Nirmal Harindran)

Two years into his term, the Devendra Fadnavis government is far from fulfilling its promise to put Maharashtra’s economy back on track with even the state’s finance managers and experts saying it has been marked by more of tinkering with economic policies than sweeping reforms.

The BJP, which came to power on October 31, 2014, had slammed the previous Congress-Nationalist Congress Party rule for “leaving the economy in shambles” and had promised a turnaround. It unveiled a white paper on finances, in which the “fiscal imprudence” of the earlier regime was targeted.

Claiming there had been an abnormal increase in revenue expenditure and that a number of subsidies were misdirected, the white paper pointed out that the state’s debt burden had spiralled 112 per cent in the last seven years of the Congress-NCP rule, from Rs 1.42 lakh crore in 2007-08 to Rs 3.02 lakh crore in 2014-15.

And now, the forecast is that this debt stock will top Rs 3.56 lakh crore by next March, a rise of 18 per cent since 2014-15. The government’s financial statement shows that till March end, the figure had crossed Rs 3.20 lakh crore.

But after the bureaucracy pointed to a rising trend of non-productive expenditure through loans raised over the past 10 years, a senior finance department official said the silver lining this time was that such diversion was almost absent this year. This year, the plan, said officials, was to raise Rs 32,000 crore to fund irrigation projects. But worried about the mounting debt, Finance Minister Sudhir Mungantiwar has been pushing off-budget market borrowings route for big-ticket urban infrastructure projects such as Metro Rail and Mumbai Trans Harbour Link.

Incidentally, Mungantiwar, in his budgets for both 2015-16 and 2016-17, had raised allocations for spending on capital works such as roads, infrastructure, and irrigation by an average 15 per cent each time. This was to be done by “curtailing non-development expenditure”, but top sources confirmed that this fiscal consolidation target was missed.

Revenue expenditure, which had already soared to Rs 1.94 lakh crore when the BJP took over, is now estimated at Rs 2.24 lakh crore, which has maintained a tight squeeze on capital expenditure, which, reveal official documents, has consistently come down from 17 per cent in 2009-10 to just about 11 per cent now.

The revenue collections—although improved from Rs 1.65 lakh crore (2014-15) to an estimated Rs. 2.2 lakh crore (2016-17) — have failed to keep pace with the surge in expenditure, resulting in the state failing to achieve the revenue surplus target. The big worry, say bureaucrats, is that the implementation of the Seventh Pay Commission (Rs 18,000 crore burden) would disturb the fiscal balance further. Also, the government has failed to mop up revenues estimated from monetisation of FSI and land.

Although the white paper promised plugging of misdirected subsidies of the previous regime, efforts in this direction are yet to bear fruit. A senior government official pointed out that a push to digitisation in governance has seen benefits of several welfare measures and doles being linked to Aadhaar, which has helped in weeding out bogus beneficiaries to a certain extent.
But bureaucrats maintain that BJP’s political promises have hurt the economic revival plan the most. The move to partially waive toll tax (Rs 800 crore), abolish Local Body Tax (Rs 6,000 crore annually), widening the ambit of concessions under Economically Backward Class category for more students (Rs 1,000 cr), approving 20 per cent grants for salaries of teachers in schools approved originally on permanent non-grant basis (Rs 163 crore), and a three-fold pay hike for lawmakers (Rs 55 crore) have imposed additional burden on exchequer.

On another key measure — tax to gross state domestic product ratio —the state hasn’t fared well. The government’s fiscal policy statement to the legislature shows that this ratio has dropped from 8.29 per cent (2013-14) to 7.97 per cent (2016-17). An official with the sales tax department said the government’s move in August to increase tax on several items and increase levy on petrol and diesel helped mop up additional resources. Excise revenues too have seen a jump in the past couple of months. But the extended slowdown in the economy has hit tax buoyancy, said sources. The government is now banking on the Goods and Services Tax regime to buck this trend.

A senior Maharashtra BJP minister said that a good monsoon in 2016 was a big positive for the economy. “The state’s agricultural economy has been on a downslide since 2013-14. Successive drought spells and unseasonal rains had ravaged crop production. Things are looking up this time. The rural economy should now be on a revival path,” he said.

Imparting skill training to youth is another area where the state has scored. Officials said the Skill Development Department, was set up after Fadnavis took over, has fructified 19 of the 22 MoUs it signed with industry captains, benefiting nearly 20,000 youth so far. A senior official said the plan was to train 6,40,000 youth through these tie-ups in five years. But some officials admitted that the government will still lag behind in meeting targets it had set for employment. The repeated need to submit supplementary grants has dented credibility of the state’s financial management.

While Mungantiwar had discussed remodelling of the budgeting process, this has yet to see the light of the day. According to the government’s Budget Estimation Allocation and Monitoring System, about 38 per cent of funds released under the government’s plan for 2016-17 were spent till October 21. Some planners say the Fadnavis administration needs more time for its policies to bear fruit.