Maharashtra’s debt burden set to cross Rs 5.20 lakh crore, 1% hike in VAT on petrol & diesel

In nominal terms, the annual Gross State Domestic Product at current prices for 2020-21 is projected to be Rs 32,24,013 crore, up 12 per cent over Rs 28,78,583 crore recorded this year.

The government also announced a 1 per cent cut on stamp duty for property transactions in Mumbai Metropolitan Region, Pune, Pimpri Chinchwad, and Nagpur, to encourage home buying and aid the ailing real estate sector, while raising VAT on petrol and diesel by Rs 1 per litre across the state.

But it was the worsening outlook of the state’s economy that stood out more prominently than the new announcements and the interventions that Maharashtra’s Finance Minister Ajit Pawar made in his speech. “The present period is complicated and challenging from the economic point of view. The country is facing serious consequences of economic slowdown. The indicators at the national level appear to be failing in terms of gross national income, production growth, employment generation, employment generation, and growth rate. The impact of this slow down is also being felt at the state level,” said Pawar, who reserved the first eight minutes of his speech discussing the trying economic climate.

Politically, the Thackeray government’s maiden Budget attempted to make the right noises dishing out popular welfare measures for various voter constituencies, including farmers, youth, and women, and the backward classes. Two weeks after rolling out the Mahatma Jyotirao Phule Karzmukti Yojana 2019 for farmers with arrears of Rs 2 lakh or less on farm loans availed between 2015-16 and 2018-19, the government on Friday widened the ambit of the waiver, introducing two new schemes — an incentive scheme for regular farm loan payers and an amnesty scheme for those with arrears in excess of Rs 2 lakh during the period. “For farmers who have regularly repaid installments till June 30, 2020 for crops loans availed between April,2017 and March, 2020, maximum Rs 50,000 will be given to such farmers as incentive for the amount of crop loan taken in 2018-19. If the amount of crop loan taken in 2018-19 is less than Rs 50,000 and it is fully repaid, such farmers will be given incentive benefit equal to the amount of crop loan availed,” Pawar announced, in his Budget speech.

“For farmers having arrears more than Rs 2 lakh taken between April 2015 and March 2019, the government will offer a one-time settlement of Rs 2 lakh to all eligible farmers after the outstanding amount above Rs 2 lakh is repaid by them,” he said. He also announced plans to extend subsidy given to farmers for setting up drip irrigation systems across the state, and plans to install 1 lakh solar farm pumps every year for five years. Sizeable allocations were made for completion of ongoing irrigation projects.

But it was the widening deficit between income and expenditure projections, and the consequent squeezing of the capital expenditure that was worrying. For 2020-21, the government has set aside Rs 47,417 crore for capital works, which is barely 10.4 per cent of the total spend estimates and also Rs 2,046 crore lower than the capital spend in 19-20. On the other hand, the revenue expenditure soared exponentially in a year where Maharashtra saw two back-to-back elections. By March end this year, the revenue deficit is projected to soar to Rs 31,443 crore, making it the worst ever deficit in the state’s history in absolute terms. In 2018-19, Maharashtra had recorded a revenue surplus of Rs 11,975 crore. While the Centre’s 14th Finance Commission norms require states to maintain a revenue surplus position, the new government has projected a deficit gap of Rs 9,511 crore or 0.29 per cent of the Gross State Domestic Product even in 2020-21. The government’s fiscal policy statement has pointed at finger at loan waiver scheme, financial assistance extended for crop losses sustained on account of natural vagaries, reduction in state’s share in Union taxes, and implementation of the Seventh Pay Commission recommendations, besides loans and guarantees extended by the previous Devendra Fadnavis-led regime while discussing the widening gap.

Blaming the Narendra Modi-led Union government for a Rs 11,789 crore decline in state’s share in Union taxes, the government downsized the overall income target for 2019-20 from 3.15 lakh crore to Rs 3.09 lakh crore, just as the revenue expenditure rose from Rs 2.67 lakh crore in 18-19 to Rs 3.41 lakh crore this year. In 2020-21, Pawar has forecast the revenue expenditure to further grow to Rs 3.57 lakh crore. The fiscal deficit, or gross borrowings of the state government, in 2019-20, was Rs 78617 crore against a budgeted target of Rs 61670 crore. It stood at 2.73% of the GSDP as against the budgeted target of 2.07%. “An optimistic fiscal deficit target of 1.69 % or Rs 54618 crore has been set for 2020-21 assuming a normal monsoon and accelerated growth,” states the fiscal policy statement.

But the downward slide in the share of state’s own tax and non-tax revenues is another worry, admitted officials. With the ongoing recessionary trend hitting consumption as well as output, the GST collections were hit, forcing the state to downsize its own tax revenue targets from Rs 2.10 lakh crore to Rs 1.99 lakh crore. The share of non-tax revenues in total receipts is down from 8 per cent in 18-19 to 4.72 per cent in 20-21.

Reaching out to the youth, the government has announced a new apprenticeship scheme, promising financial assistance to establishments hiring youngsters on apprentice basis, and the establishment of 1 lakh new industries through self-employment under the Chief Minister Employment Generation Program. Reiterating a promise made in the coalition’s Common Minimum Programme, Pawar also said that “the government intends to make a law for reserving a quota for local candidate in industrial jobs.” It was also announced that women self-help groups will be given priority in government procurement contracts up to Rs 1000 crore and that dedicated women police stations will come up in every district. News hostels were announced for backward classes students in Mumbai and Pune, while a “chair” in the honour of Dr Bhimrao Ambedkar will be opened in the London School of Economics. Invoking ‘Marathi’ pride, the government announced setting up of Marathi Bhasha Bhavan in Mumbai, and financial assistance to Marathi schools and newspapers in the disputed Belgaum.