In a fresh warning that its fiscal outlook is worsening, the state’s Budget for 2019-20 has projected that Maharashtra’s total debt will cross Rs 4.72 lakh crore by March 20, forcing the government to spend a staggering Rs 35,207 crore in 2019-20 on servicing this debt.
In its last Budget of this term, the Devendra Fadnavis government on Tuesday spelt out a Rs 4.05 lakh crore expenditure plan with enhanced allocations for capital investments in farm-intensive and rural infrastructure sector headlining the Budget.
With state polls due in October, the farm sector, which caters to the livelihood of about 53 per cent of the state’s population, was the focal point of Finance Minister Sudhir Mungantiwar’s Budget speech in the Legislative Assembly.
Facing heat over growing agrarian distress and a drop in the farm economy, Mungantiwar devoted a major part of his Budget speech to farm-related announcements. “Through this Budget, the government reaffirms its commitment of standing firmly by farmers,” he said.
Indicating that the government was planning to enhance the ambit of the ongoing farm loan waiver scheme, Mungantiwar said, “The government is going to take a decision shortly to give benefit of this scheme to even those farmers who became ineligible due to technical reasons. There won’t be any shortage of funds.” He also announced that various concessions and benefits extended to drought-hit farmers would also be provided to farmers in areas that could not be declared as drought-hit for technical considerations. Sizeable allocations were made for completion of irrigation projects, promoting micro-irrigation, and setting up value chains to sell agriculture produce.
In an election year, no new taxes were announced. Politically, the Budget attempted to make the right noises dishing out populist sops for various disadvantaged sections and castes, including the Dhangar (shepherd) community and the Other Backward Classes. With Prime Minister Narendra Modi reaching out to minorities after his Lok Sabha win, the Maharashtra government, too, has made a special Rs 100 crore provision for skilling women and youth from the community. Several measures were also announced towards women empowerment.
But it was the worsening outlook of the state’s economy that stood out more prominently that the new announcements and interventions that Mungantiwar made in his speech. While the Centre’s 14th Finance Commission norms require states to maintain a revenue surplus position, Maharashtra has now consistently missed the target since 2012-13. In 2019-20, the revenue deficit is estimated to soar to Rs 20,293 crore, making it the worst ever deficit in the state’s history in absolute terms. In 2018-19, the deficit gap was Rs 14,960 crore or 0.56 per cent of the Gross State Domestic Product (GSDP). The government’s fiscal policy statement has pointed a finger at some of the subsidies, concessions, and guarantees extended while discussing the widening deficit gap.
Just as the government thumped its back for surpassing the income target for 2017-18 with collections touching Rs 2.86 lakh crore by March-end, an exponential rise in revenue expenditure had resulted in the widening of the deficit gap. In 2019-20, Mungantiwar has forecast the revenue expenditure to further grow to Rs 3.35 lakh crore.
Consequently, the public sector investments on capital expenditure has been squeezed further. For 2019-20, it has set aside Rs 43,667 crore for capital work, which is barely 10.29 per cent of the total spend estimates. A white paper on the health of Maharashtra’s finances had earlier slammed the consistent decline in the share of capital spending. The fiscal deficit, or gross borrowings of the state government, in 2018-19 was Rs 56,053 crore against a budgeted target of Rs 50,586 crore. It stood at 2.11 of the GSDP as against the budgeted target of 1.81. “An optimistic fiscal deficit target of 2.07% or Rs 61,670 crore has been set for 2019-20 assuming a normal monsoon and accelerated growth,” the fiscal statement states. Mungantiwar said that the fiscal deficit to the GSDP ratio was well within fiscal parameters.
The downward slide in the share of non-tax revenues is another worry, admitted state government officials. “The share of non-tax revenue in total receipts is down from 8% to 5.34%. “After the implementation of the Goods and Services Tax, there are limitations on increasing tax revenue. To increase non-tax revenue, a review committee is formed for revision of existing fees and fines under all departments. It is also proposed to revised various taxes under the motor vehicle department, state excise, stamp duty, etc,” the finance department said.
For improvement in road infrastructure, Mungantiwar has pushed the construction and improvement of 10,000-km roads under a Rs 30,000-crore hybrid annuity model. Allocations have also been enhanced under the Mukhya Mantri Gram Sadak Yojana, for the upgradation of rural roads. Replicating the Centre’s policy, the cash-starved government has taken recourse to off-budget borrowings for all big-ticket infrastructure projects — including the Mumbai Metro rail projects and the Mumbai-Nagpur Samruddhi Corridor — keeping them off the government’s balance sheet.