Mumbai, March 9 (IANS) Amid financial constraints to continue freebies and simultaneously carry out capital expenditure despite rising public debt, the fiscal and revenue deficits, Maharashtra Deputy Chief Minister and Finance and Planning Minister Ajit Pawar will present the state budget for the year 2025-26 on Monday.
It will be the first budget of the newly-elected MahaYuti government but it will be Ajit Pawar’s eleventh budget as Finance Minister. He will become the second Finance Minister after Sheshrao Wankhede (who had presented a record 13 times) to present the state budget more than 10 times not necessarily in succession. Former finance minister Jayant Patil had presented the budget 10 times and Sushilkumar Shinde nine times.
Ajit Pawar faces the major challenge of bridging the gap between receipts and expenditures while laying a much-needed emphasis on financial discipline in a bid to chase the state government’s much more ambitious target of a $1 trillion economy by 2027-28.
Ahead of the presentation of the budget for 2025-26, the state government has initiated a 30 per cent spending cut in revenue and capital expenditure from annual allocation in various degrees across departments.
The state finance department has estimated that the fiscal deficit has already crossed Rs 2 lakh crore against the budget estimate of Rs 1.10 lakh crore by the end of 2024-25 due to a slew of welfare and development schemes of Rs 96,000 crore including Ladki Bahin Yojana launched in the July last year.
However, the experts believe that the fiscal deficit may to widen to 4.8 per cent of gross state domestic product (GSDP), significantly higher than earlier estimates of 2.6 per cent if the state government continues to implement various welfare and development schemes unabatedly. Fiscal deficit is projected to be lowered to 2.3 per cent of GSDP by 2026-27. The populist schemes were amounting to 2.2 per cent of GSDP and 19 per cent of revenue receipts.
A state finance department officer said with committed expenditures (salaries, pension, and interest payments) already accounting for 55 per cent of revenue, only 26 per cent of revenue is available for discretionary spending, including capex. Despite being India’s largest state by economic size, Maharashtra’s capex-to-GSDP ratio averaged just 1.5 per cent from fiscal 2019 to 2024, placing it at 16th out of 19 large states.
The state government has budgeted a revenue deficit of Rs 20,500 crore, which is 0.5 per cent of GSDP for FY25. With additional funds earmarked for women welfare schemes such as Rs 25,000 crore for the Majhi Ladki Bahin Yojana, Rs 6,056 towards skill development, Rs 4,317 crore towards social justice, Rs 4,185 crore towards public health and allocation towards other welfare measures, the revenue deficit would be 1.3 per cent of GSDP in FY25.
However, the state government faces an acid test to fulfil its poll promise of increasing monthly aid to Rs 2,100 from Rs 1,500 to women beneficiaries under the Ladki Bahin Yojana.
“This change is likely to increase the budget allocation by 40 per cent, from Rs 46,000 crore (1.1 per cent of the GSDP) to Rs 64,400 crore (1.5 per cent of the GSDP),” according to the finance department sources.
Another challenge the government faces is rapidly rising public debt even though it has proposed to maintain the tax revenue of 11.70 per cent of GSDP in 2024-25, 2025-26 and 2026-27. The total debt stock, which was Rs 7.11 lakh crore in 2023-24 and expected to increase to Rs 7.82 lakh crore in 2024-25 will be 17.59 per cent and 18.35 per cent respectively.
However, the government has estimated total debt of 18.61 per cent and 18.91 per cent in 2025-26 and 2026-27 respectively in the wake of its focus on generating productive assets. However, the government claims that the total debt will be maintained within the permissible limit of 25 per cent of the GSDP.
Incidentally, NITI Aayog in its report on the Fiscal Health Index released in January has cautioned the Maharashtra government about the surge in the debt. “Debt has grown at an average rate of 9.92 per cent annually between 2018-19 to 2022-23. The majority of the borrowing was used to repay older borrowing in the current period. While the Debt to GSDP ratio went down marginally to 18.1 per cent in the current year from 19.3 per cent in 2021-22, it stood at 17.27 per cent in 2018-19. The ratio of interest payment to Revenue Receipts has also declined from 12.2 per cent in 2018-19 to 10.3 per cent in 2022-23,” reads the report.
However, the finance department sources said that Ajit Pawar in his budget will give the government’s road map to increase own tax and non-tax revenue by tapping the loopholes and curbing tax evasion. He will also provide a government blueprint to regain Maharashtra’s revenue surplus state position. Further, Ajit Pawar is expected to release an action plan to higher growth of the state economy than that of the country’s economy. The Medium Term Fiscal Policy Statement has clearly indicated that its successful implementation will take the state’s economy to $1 trillion by 2028 and $3.5 trillion by the nation’s centennial year.
(Sanjay Jog can be contacted at sanjay.j@ians.in)
–IANS
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