Maharashtra, India’s most industrialised state and the highest taxpayer, is also the most indebted state in the country. Total liabilities of the state have shot up by 34.50 per cent in the last four years to Rs 379,360 crore (budget estimate) in fiscal 2016, and it continues to occupy the top slot among the states in the country, says a study on ‘States finances’ by the Reserve Bank of India (RBI).
Maharashtra’s debt has been rising every year, with interest payments also shooting up. The state’s borrowing has gone up Rs 97,350 crore in the last four years. Uttar Pradesh, with borrowings of Rs 327,470 crore, is in the second position in indebtedness, followed by West Bengal (Rs 308,800 crore) and Andhra Pradesh (Rs 262,850 crore), the RBI study says.
The western state accounts for 12.2 per cent of the total debt of all Indian states at Rs 31,04,380 crore. A major reason for the high borrowings is the irrigation sector in Maharashtra. There was cost overrun in several projects of irrigation development corporations under the Water Resources Department. The estimated cost of 515 ongoing irrigation projects was Rs 97,101 crore. Of these 515 projects, there was cost overrun in 401 projects amounting to Rs 44,061 crore – an increase of more than two times the original cost, the Comptroller and Auditor General (CAG) said earlier this year.
Maharashtra leads in interest payments as well. The state’s interest payment in 2015-16 amounted to Rs 27,660 crore as against Rs 24,280 crore in 2014-15 and Rs 21,210 crore in 2013-14, RBI data shows. Tamil Nadu was in the second position with interest payments of Rs 17,140 crore in 2015-16 as against Rs 14,790 crore in the previous year. Gujarat came third with Rs 16,310 crore interest payment.
However, it’s not that bad on the debt front. Most states have showed an improvement in outstanding liabilities to GSDP (Gross State Domestic Product) ratio. This means, the economy has grown faster than the debt accumulation, leading to a decline in the ratio in the last 10 years.
The high growth period between 2004 and 2008 contributed significantly to the improvement in states’ finances. The ratio for Maharashtra improved to 20.1 per cent in 2016 from 37.4 per cent in 2004, according to the RBI report.
The outstanding liabilities to GSDP ratio is the worst for Jammu & Kashmir at 52.3 per cent, followed by Manipur at 48.3 per cent and Mizoram at 41.9 per cent, says the report. This is not an ideal situation as it indicates these states have lagged behind in economic growth while debt levels shot up.
Adding to the worries, pension liabilities of states at an aggregate level have almost doubled between 1997-98 and 2014-15 (revised estimate). Growing pension liabilities could be another major source of fiscal strain for states in the future.
“The new initiative of the government to financially turnaround discoms – Ujjwal Discom Assurance Yojana (UDAY) – may likely alleviate the non-performing asset (NPA) problem of banks, but would increase the liabilities of participating states,” the RBI said.