Maharashtra the only state that can manage farm loan waiver within finance panel rules

That means it has an elbow room for spending an additional Rs 38,789 crore without violating the rules. The Devendra Fadnavis government’s loan waiver for marginal farmers is expected to cost the state over Rs 30,000 crore. Thus, the math works in favour of Maharashtra.

Written by Khushboo Narayan | Mumbai | Published:June 17, 2017 3:21 am
Farmers protest in Maharashtra. (File)

Maharashtra is the only state that will be able to pay for its farm loan waiver without abandoning the path of fiscal rectitude, says a new study by ratings agency, CARE Ltd. It has arrived at this conclusion after studying the budgets of different states for the 2017-18 financial year and applying rules suggested by the Fourteenth Finance Commission (FFC). Maharashtra has projected a fiscal deficit of 1.5 per cent of gross state domestic product for FY 2017-18, or around Rs 38,700 crore. Under FFC rules, Maharashtra is allowed to have a fiscal deficit of up to 3 per cent.

That means it has an elbow room for spending an additional Rs 38,789 crore without violating the rules. The Devendra Fadnavis government’s loan waiver for marginal farmers is expected to cost the state over Rs 30,000 crore. Thus, the math works in favour of Maharashtra. Other states like Bihar and Karnataka are allowed a maximum fiscal deficit of 3.5 per cent under the FFC rules because they fulfill certain other conditions such as having revenue surpluses and a lower debt to state GSDP ratios. However, Bihar has projected a fiscal deficit of 2.87 per cent of GSDP and Karnataka 2.6 per cent. Thus, the additional headroom available is constricted.

Karnataka’s fiscal leeway is Rs 11,547 crore and Bihar’s is Rs 3,976 crore. Both states have not announced farm waivers. However, given the protests across the country by farmers, there is a chance of more states allowing such waivers and damaging their fiscal positions.

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