In Maharashtra and Jharkhand, lofty poll promises could further strain already tight fiscal situation in both states

Notably, Jharkhand boasts the lowest female unemployment rate in India even as it offers the highest wages in organised manufacturing. Yet, per capita income remains a challenge for both states. Although Maharashtra leads the nation in economic activity, its per capita income growth has been sluggish, with a CAGR of just 2.99 per cent over the last five years, trailing the national average of 3.11 per cent.

Maharashtra: Largest contributor to India’s GDP with services sector in the lead

Maharashtra, where elections are slated for November 20, saw its gross state domestic product (GSDP) grow by 7.6 per cent in 2023-24, reaching over Rs 24 lakh crore (at constant prices) from Rs 20 lakh crore in 2018-19. The state’s economy continues to be largely driven by services — primarily real estate, financial services, and hospitality — which contribute roughly 60 per cent to its gross value addition, followed by manufacturing at 30 per cent and agriculture at 10 per cent.

Later this month, Maharashtra will see a face off between the incumbent Eknath Shinde-led Mahayuti alliance that formed the state government in 2022 after the Uddhav Thackeray-led Maha Vikas Aghadi (MVA) alliance fell due to insufficient numbers in the state assembly.

Holding its position as India’s economic powerhouse since 1960, Maharashtra’s contribution to national GDP has only slightly declined, from 15.2 per cent in 2010-11 to 13.3 per cent in 2023-24. Despite growing competition from states like Tamil Nadu (8.9 per cent of GDP) and Karnataka, Gujarat, and Uttar Pradesh (each around 8 per cent), Maharashtra has retained its lead. According to estimates, Maharashtra is likely to be the first Indian state to become a $1 trillion economy by 2040.

But sluggish growth in per capita income, unemployment a key focus

However, the state’s per capita income growth has been comparatively sluggish. From 2019-20 to 2023-24, per capita income rose at an annually compounded rate of 2.99 per cent to Rs 1.64 lakh (at constant prices), trailing behind the national average CAGR of 3.11 per cent. Other big states like Gujarat, Tamil Nadu, and Karnataka have outperformed Maharashtra on this indicator.

Maharashtra’s fiscal deficit as a percentage of GSDP has increased from 2 per cent in 2021-22 to 2.8 per cent in 2023-24, with potential to increase further on account of populist poll promises. On the other hand, its debt-to-GSDP ratio has improved, declining to 17.6 per cent from 18.3 per cent over the same period.

In the run-up to the polls, both the Mahayuti that is in power and the MVA alliance in opposition have made promises that include various sops for women, farmers, and unemployed youth that could further stress the state’s finances.

Unemployment in Maharashtra has remained below the all-India average between 2019-20 and 2022-23. However, in 2023-24, it slightly exceeded the national average at 3.3 per cent compared to 3.2 per cent. For contrast, in 2021-22, Maharashtra’s rate was 3.5 per cent against the national average of 4.1 per cent. The state’s average unemployment rate over the last five years was 3.4 per cent, while the youth unemployment rate has averaged at a higher 11 per cent.

Unemployment is a key poll issue, with Deputy CM Devendra Fadnavis pledging to fill at least 1 lakh government jobs once back to power, while Aditya Thackeray from the Opposition MVA alliance has promised to conduct job fairs every four months.

Inflation also remains a key point of concern. In September, retail inflation in the state stood at 5.04 per cent as against the all-India rate of 5.49 per cent. Even though in FY24, the inflation rate eased to 5.1 per cent from 7.3 per cent a year ago, over the last four years, the inflation rate in the state has remained above 5 per cent.

Jharkhand: High wages in manufacturing but low per capita income

With the lowest female unemployment rate and the highest manufacturing wages in the country, Jharkhand is set to vote in two phases November 13 and 20. A state rich in minerals, which helps it earn over three-fourth of its non-tax revenue and around 14 per cent of total revenue, Jharkhand, however, grapples with the challenge of high debt-GSDP ratio, with the levels hovering over 30 per cent in the last three years.

In Jharkhand, the incumbent CM Hemant Soren’s Jharkhand Mukti Morcha (JMM) in alliance with the Indian National Congress (INC) will face off against the BJP, which lost the 2019 assembly elections under CM Raghubar Das.

While high manufacturing wages indicate better employment conditions in the organised sector in the state, other sectors and economic indicators lag behind. The per capita income in Jharkhand is among the lowest in the country along with Bihar, Uttar Pradesh and Manipur. In 2023-24, per capita net state domestic product (at constant prices) was the lowest for Bihar at Rs 32,174, followed by Uttar Pradesh at Rs 50,875 and Jharkhand at Rs 65,062.

Manufacturing accounts for around 30 per cent of the state’s GSDP, next only to the services sector whose share is around 45 per cent. The mining-focused nature of economic activity in Jharkhand is reflected in the high wages in the organised manufacturing sector, with the state recording Rs 3.17 lakh as wages per worker — the highest among 35 states and union territories of the country and over 1.5 times of the all-India wage per worker of Rs 2.05 lakh in 2022-23, data from the latest Annual Survey of Industries 2022-23 showed.

On the inflation front, retail inflation moderated to 5.7 per cent for 2023-24 from 6.1 per cent in 2022-23. In September, the inflation rate in the state was at 5.15 per cent, a bit lower than the all-India inflation rate of 5.49 per cent.

The Jharkhand government’s capital expenditure has grown steadily over the last three years, rising 27 per cent in 2023-24 to Rs 31,742 crore from Rs 24,956 crore in the previous year.

“In the recent time period, not only has Jharkhand been increasing its capex, which means their borrowings are largely being put into capex, within that also a very high proportion is going towards social services, which includes new schools, hospitals, etc. That is favourable and vital for the development of human capital,” Paras Jasrai, senior economic analyst at India Ratings.