Maha budget: Unprecedented revenue shortfall, decline in growth rate
A huge deficit in revenue, projection of decline in growth and debt of over ₹6 lakh crore – the state is staring at a bleak financial future, if the economy is not revived in a short period.
Maharashtra’s economy, which is projected to register -8% growth in the current financial year, is staring at a drop of upto ₹1 lakh crore in its revenue. This has badly affected the spending on development projects and people-centric funds, forcing the government to reduce the expenditure.
To make it worse, the debt on the state has mounted to ₹6,15,170 crore in 2021-22, from ₹5,38,304 crore in 2020-21.
Finance minister Ajit Pawar, while presenting ₹4,37,961-crore budget for 2021-22, has projected a revenue generation of ₹3,68.987 crore. With the expenditure is expected to be ₹3,79,213 crore, the budget presented on Monday is expected to have deficit of ₹10,226 crore.
The pandemic has not only resulted in drop in the revenue, but also high borrowing. With ₹87,190 crore and ₹76,866 crore to be borrowed in 2020-21 and 2021-22, the debt in two years of Maharashtra Vikas Aghadi government is ₹1.64 lakh crore, 27% of the total debt on the state.
This has resulted in an increase in the borrowing percentage against the Gross State Domestic Product (GSDP). The percentage of the debt against the GSDP will stand at 20.22% in 2020-21 and may be 20.64% in 2021-22. The crisis-like situation in state finances can be imagined from the fact that the debt amount had never crossed 20% of GSDP at least in the past 10 years. The state can raise upto 25% of the GSDP as per the Fiscal Responsibility and Budget Management Act norms. It was 16.01% in 2019-20.
Anticipating the slow pace of revival of the economy in next financial year, the state has projected a rise of only 6.2% in revenue generation over previous year’s target. The state generally sets the target of rise in revenue collection by 10-12% over previous year.
The reduction in the revenue receipts has resulted in contraction in spending on development projects. According to the state’s website, the spending of most of the departments hovers around 50%, which is not expected to cross much in the remaining two months of the financial year. The government has already cut on the allocation done in last year’s budget. The expenditure allocation has been reduced to ₹3.36 lakh crore from the proposed ₹3.57 lakh crore.
Pawar said the revenue receipts, which have been reduced by ₹57,959 crore, are expected to increase further if the central government does not release the state’s share in tax collection on time.
According to state officials, Maharashtra’s outstanding with the Central government is around ₹50,000 crore. “Besides, the dues of ₹30,000 crore towards the outstanding of GST and central taxes devolution of ₹6000 crore is pending with the Centre. A total of ₹13,630 crore are yet to be released toward the centrally sponsored scheme. Of the ₹50,000 crore to be released by the Centre, not more than ₹10,000 crore are expected to be released this financial year. This will result in revenue receipts for the current financial year dropping further to ₹2.50 lakh crore,” the official said.
Subodh Kumar, former finance secretary, said, “The state government should have put in great effort for resource mobilization from non-tax sources. It could have helped them in reducing the fiscal deficit to a great extent.”
Former finance minister and BJP leader Sudhir Mungantiwar questioned why the state had not been able to spend more on development despite having proposed to raise huge loans. “They are borrowing more than ₹1.5 lakh crore in two years. Why are they not been able to spend more for general public,” he asked.
For the current fiscal year, the state has revised its target of revenue receipts from all major heads. The GST generation expected in 2020-21 is now reduced to ₹88,000 crore from ₹1,07,146 crore, sales tax to ₹34,000 crore from ₹40,000 crore, excise duty to ₹15,000 crore from ₹19,225 crore.