Maharashtra’s debt rose by Rs 1.11 lakh crore in the past seven years. Presenting his maiden Budget in the Assembly on Thursday, State Finance Minister Sunil Tatkare said the state’s debt was likely to balloon to Rs 2.09 lakh crore by the end of 2010-11. This would make Maharashtra India’s most indebted state.
However, the Finance Department said it was not worried because the ratio of debt to the gross state domestic product — Maharashtra’s total economic output — was 22.3 per cent, well within the 25 per cent mark set by the Centre.
“We haven’t had an overdraft in the past three years. Our credit rating is high. The worry is when debt increases, but income doesn’t,” said Tatkare.
Not everyone is convinced. Especially because the state spends a substantial part of its income just on interest payments. In 2010-11, the state will pay Rs 15,959 crore as interest. This money could have helped fund the Sewri-Nhava sealink as well as the proposed inland waterways transport project.
“The state is in a debt trap. Our debt and interest liability rise every year. We are borrowing to pay interest on the original debt,” said Professor H.M. Desarda, an economist. Desarda said the development plans were an eyewash since the government is incapable of spending the money allocated.
Priya Khan of Samarthan, an organisation that analyses the state Budget, said: “More than 60 per cent of the revenue is drained by interest payments and salaries. How can it spend on development then?”
The Finance Department claimed that public finances would be back in shape soon and a surplus budget might become a reality in three years.
“This year, our earnings — especially sales tax — show that the slowdown is behind us. The Sixth Pay Commission is also not as much a strain as it was last year,” said Finance Secretary Vidyadhar Kanade.
The state’s income has indeed seen a 13.5 per cent hike, with sales tax posting the highest revenue at Rs 35,000 crore.