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Maharashtra growth story slumps to weakest in 3 years

On financial inclusion, the ESR reported that as on February 7, 2018, about 2.2 crore bank accounts had been opened in the state under the Pradhan Mantri Jan Dhan Yojana with deposits of about 4,304 crore.

Written by Sandeep A Ashar | Mumbai |
Updated: March 9, 2018 7:19:06 am
Maharashtra growth story slumps Maharashtra chief minister Devendra Fadnavis (Express Photo by Prashant Nadkar/Files)

MAHARASHTRA’S economic growth has slumped to 7.3 per cent in 2017-18, the weakest in the three years of Devendra Fadnavis’s government. According to the Economic Survey Report (ESR) 2017-18, presented to the Maharashtra legislature on Thursday, the real gross state domestic product (GSDP) at constant (2011-12) market prices for the year ending March 2018 will be Rs 19,59,920 crore, up 7.3 per cent over 2016-17. India’s most industrialised state had recorded a high 10 per cent growth rate last fiscal. In 2015-16, the Fadnavis government had recorded a 7.6 pc growth.

This year’s stunted growth comes on the back of a poor monsoon that adversely impacted the farm sector, sharp increase in revenue expenditure on account of the government’s farm loan waiver, and lingering impact of demonetisation.

Incidentally, in January, the Centre too had lowered its own growth estimates for 2017-18 from 7.1 pc in 2016-17 to 6.5 pc. The downward slide of Maharashtra’s economy comes when the state, aiming to become a $ 1-trillion economy by 2025, had aimed for double-digit growth again. But the ESR estimates now show that it has fallen way short of the target.

Maharashtra Finance Minister Sudhir Mungantiwar, who will present that state’s budget estimates for 2018-19 on Friday, however, struck a positive note. “Despite various economic challenges, we could achieve a 7.3 per cent growth. It is higher than India’s overall growth rate. Even as the growth estimates had to be lowered due negative farm growth, we continue to be the fastest growing state economy,” Mungantiwar said.

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Mungantiwar cited the growth rate numbers of some developed world economies to claim that “the state was growing at a faster clip than them as well”. Ironically, the ESR painted a positive outlook on the global economic situation. “As per the World Economic and Prospects report 2018, global economic growth is estimated to have reached 3 per cent in 2017, a significant acceleration compared to the growth of 2.4 per cent in 2016,” the report stated.

The deepest worry line for the Devendra Fadnavis government, ahead of the next budget, is the projection of a double-digit Maharashtra growth story slumps to weakest in 3 years negative growth in the farm sector, which provides livelihood to over 52 per cent of the state’s population. After witnessing a record crop production in 2016-17, the farm sector is now on a sharp downward spiral and is expected to clock a 14.4 pc negative growth.

The ESR has blamed poor monsoon for the slide. “In 2017, the state received only 84.3 per cent of the normal rainfall. Four in every ten talukas received deficient rainfall,” it said. This led to a sharp decline in crop production in both, the kharif and rabi seasons. Senior officials further said unseasonal rains and pink bollworm (PBW) infestations had adversely hit production. According to the ESR, the overall foodgrain production is projected to drop from 17,230 metric tonne (MT) in 16-17 to 13,283 MT this year, a sharp 23 per cent drop. While the pulses segment has seen a production decline of 27 pc, cereals have recorded a 21 pc drop. The PBW infestation ravaged 83 pc of cotton farms, and resultantly the cash crop’s production is down 44 pc, while oilseeds and vegetable production have dropped by 18 pc and 14 pc respectively.

The sole positive growth story in the farm sector was a 25 per cent positive growth projection for sugarcane production, which is the main kharif cash crop for farmers in western Maharashtra and Marathwada. The cane production has gone up from 54,237 MT in 2016-17 to 67,863 MT in 2017-18. Horticultural crop production also declined.

Overall, Maharashtra’s rural economy, which includes livestock farming, forestry and logging and fishing and aquaculture, is expected to grow at -8.3 per cent. While the government has thumped its back on capital investments made in the irrigation and water conservation sectors to boost the rural economy, senior officials said that the farm loan burden, which is expected to be over Rs 20,000 crore, had resulted in a steep rise in the revenue expenditure, impacting the health of the state’s economy.

While Mungantiwar had set aside Rs 2.48 lakh crore for revenue expenditure in his budget estimates at the start of the year, sources said the actual expenditure will be much higher. On the other hand, the capital expenditure has remained constant at less than 12 per cent of total expenditure. Ahead of the budget, another worrying factor for the government is that it has strayed from fiscal consolidation and consistently missed the fiscal targets.

Mungantiwar admitted that the rising gap between revenue income and expenditures remained a concern, but claimed that “all fiscal targets were well within prescribed limits”. He further said that the state’s economy was in sound health. “Along with Arthshastra (economics), a government must also focus on bhookshastra (hunger allievation) and krishishastra (farmer welfare). There must be a balance. And we have tried to do that,” he said.

The government’s salary and pension bill for 2017-18 has ballooned to Rs 1.13 lakh crore, which is a 50 per cent jump over Rs 74,921 lakh crore it was spending on the head in 2013-14. With the government expected to roll out the Seventh Pay Commission reforms in the budget, this bill will further shoot up in 2018-19. Mungantiwar defended that there has been a substantial growth in public sector capital investments under the Fadnavis government.

While the economic report card was silent on the lingering impact of demonetisation on the output and the consumption across sectors, it said there is stunted growth projection for the industries sector. The industries’ growth rate has slipped from 6.9 pc (2016-17) to 6.5 pc (2017-18). Despite the government’s Make In India push, the segment has consistently been on a downward spiral since 2014-15, when it clocked 8 per cent growth. According to the ESR, the manufacturing sub-sector is expected to decelerate from 8.3 per cent (2016-17) to 7.6 per cent (2017-18), while the mining and quarrying segment has dipped sharply from 7.6 per cent to 2.7 per cent. The construction sector too has recorded a slump, while the Power,Gas, Water Supply, Utilities sub sector has upsurged from -2.8 per cent to 7.6 per cent.

According to state’s fiscal managers, the transitory impact of the switch to the GST regime was also felt, with the rapidly expanding services sector also feeling the pinch. The growth in the trade, hotel and restaurants, transport, and communications sub-sectors, for instance, witnessed a decline from 8.9 per cent to 8 per cent.

But on the back of a strong performance from the financial services sector, the services sector is expected to grow at 9.7 per cent overall. Maharashtra’s per capita net income in 2017-18 was Rs 1,80,596 crore. “In per capita income, Maharashtra is the leading state among major states,” said Mungantiwar. “The year-on-year inflation, which was in the negative zone from November 2014 to March 2016, was 1.8 pc for rural areas and 2.1 pc for urban areas between April 2017 to December 2017,” the report said.

On financial inclusion, the ESR reported that as on February 7, 2018, about 2.2 crore bank accounts had been opened in the state under the Pradhan Mantri Jan Dhan Yojana with deposits of about 4,304 crore. Further, under the Pradhan Mantri Mudra Yojana, total loans worth Rs 14,235 crore had been distributed to 26.1 lakh beneficiaries till February 9.

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