Maharashtra: Despite Presenting A ‘’Please All’’ Interim Budget, Govt Faces Huge Challenge Of Fiscal Management

Even though Maharashtra Deputy Chief Minister Ajit Pawar, who holds finance and planning departments, on Tuesday presented ‘’please all’’ interim budget for 2024-25 in view of the upcoming Lok Sabha elections, the MahaYuti Government faces a huge challenge of fiscal management due to rising mismatch between revenue and expenditure, surging outgo towards salary, pension and interest payment and burgeoning public debt.

Although the government has laid due emphasis on the infrastructure development spending, it has a limited scope to meet the ever rising funds needed for capital expenditure which is necessary for asset creation, revenue mobilisation, employment generation and boosting consumption. As on date infrastructure projects worth Rs 8 lakh crore are underway in Maharashtra and most of which were not funded by budgetary provisions but by the state undertakings through their own resources and debt.

As the saying goes, the devil is in the details. Although Pawar has taken credit for keeping the state’s fiscal deficit (2.32%) and revenue deficit (0.23%) within the limits set by the Fiscal Responsibility and Financial Management Act, the government faces major constraints in maintaining the same status. Unless and until the government makes all out efforts to boost revenue, it may have to introduce periodical cuts in the expenses of various departments against what is proposed in the budget. This has an inbuilt danger of impacting the growth of the economy.

Although Pawar has projected a revenue deficit of Rs 9,733.76 crore  (Budget Estimate) for 2024-25, the revised estimates (RE) for 2023-24 has reported at Rs 19,531.64 crore against the BE of Rs 16,122.41 crore. Similarly, the Fiscal Deficit has been projected at Rs 99,288.46 crore (BE) but the RE was recorded at Rs 1,11,955.94 crore against the BE of Rs 95,500 crore.

The ever rising administrative expenditure mainly on salary, pension and interest payment has been a matter of serious concern for the government.  The state government’s outgo towards salary has been projected at Rs 1,59,034 crore (BE) against Rs 1,42,718 crore (RE 2023-24), a rise of 11.43%, pension Rs 74,011 crore (BE) against Rs 60,446 crore (RE), an increase of 22.44%, interest payment Rs 56,727 crore (BE) against Rs 48,578 crore, a rise of 16.55%. The government will have to shell out more as it has permitted an old pension scheme option for government employees hired through advertisements issued before November 2005.

Furthermore, the government’s public debt is estimated at Rs 7,82,991 crore (BE) for 2024-25 against Rs 7,11,278 crore (RE 2023-24).  Even though it is within the 25% limit of the Gross State Domestic Product, the government won’t be in a position to keep its show on by raising debt as it will have to further step up efforts for boosting revenue generation.

There the rising government’s own tax is a. Silver lining as it is estimated at Rs 3,43,040.32 crore (BE 2024-25) against Rs 3,26,397.55 crore (BE 2023-24). Of the Rs 3,43,040.32 crore, the state expects to collect as high as Rs 1,55,755.59 crore through State Goods and Services Tax (which constitutes 65% of its total own tax collection), value added tax Rs 62,500 crore, stamp duty and registration fees Rs 55,000 crore, state excise duty Rs 30,500 crore, Motor Vehicle tax Rs 14,875 crore, taxes and duties on electricity Rs 14,180 crore, land revenue Rs 3,000 crore, other taxes on income and expenditure Rs 3,500 crore, taxes on goods and passengers Rs 1,760 crore and other taxes and duties on commodities and services Rs 1,969.73 crore. The government will have to focus on further increasing the SGST by curbing evasion. Similarly, the government may explore an option of cutting stamp duty and registration fees for some period as it may increase revenue as it was reported during the Maha Vikas Aghadi government.

Moreover, the state government’s ambitious target of a $1 trillion economy looks difficult to achieve unless and until it makes substantial increase in capital investment through state government departments, state Public Sector Undertakings and private sector. Maharashtra’s current economy is worth $433 billion and if it has to become a $1 trillion the GSDP needs to grow at 14-15% against 6.7% in 2022-23.  Although the government has been contemplating the monetisation of assets including land, it has failed to gather momentum.

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