Maharashtra's fiscal masterstroke, or is it? | Number Theory

The state government will spend ₹7.69 lakh crore in the coming fiscal year without breaching the fiscal deficit limit of 3% of GSDP

Chief Minister Devendra Fadnavis, who also holds the finance portfolio now, presented Maharashtra’s Budget for 2026-27 on Friday. The state government will spend ₹7.69 lakh crore in the coming fiscal year without breaching the fiscal deficit limit of 3% of GSDP. More importantly, the state has achieved a formidable feat of having maintained its deficit levels around the budgeted levels despite spending ₹55,000 crore more than budgeted in the fiscal year which will end on March 31. This has been made possible by higher-than-expected revenue receipts thanks to higher growth and an addition to the state’s existing debt stock. Here are three charts which explain Maharashtra’s fiscal situation as shown in the latest budget in detail.

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  Both spending and receipts in 2025-26 RE are significantly higher than BE numbers

  Maharashtra’s fiscal health, rather lack of it, was widely debated through all of the current fiscal year. The Budget presented on Friday suggests that the concerns may have been exagerrated. The state government has indeed overshot its spending targets by a distance. Total expenditure in 2025-26 Revised Estimate (RE) numbers is ₹7,55,920 crore. This is 8% more than the ₹7,00,020 crore in the 2025-26 Budget Estimates (BE). However, the state has seen an almost proportionate increase in its receipts too. 2025-26 total receipts, according to the RE numbers are ₹7,55,748.24 crore compared to ₹6,99,568.92 crore in the BE. Bulk of the increase in both spending and receipts is on account of revenue heads. This has kept the fiscal deficit between BE (2.76%) and RE (2.97%) estimates almost unchanged.
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  The short answer is growth and higher grants from the Centre. Out of the ₹56,179 crore windfall in total budgets receipts of the state between 2025-26 BE and RE numbers, the second biggest positive surprise of ₹21,920 crore has come from state’s own tax revenue which has more than cushioned the headwinds of central tax devolution ending up ₹1,823 crore lower between 2025-26 BE and RE. The second highest cushion has come from grants–in-aid from the Centre which has increased by ₹17,489 crore between 2025-26 BE and RE numbers. The biggest source of additional spending in the budget however is a higher debt by the state government, which borrowed ₹1.72 lakh crore as per RE numbers instead of the ₹1.44 lakh crore assumed in last year’s budget. Maharashtra’s debt-GSDP ratio is expected to increase to 20.38% in 2026-27; a massive increase compared to the 15.52% in 2023-24.
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  2026-27 budgetary numbers are significantly sober compared to the fiscal performance this year

  This is the most counter-intuitive aspect of the fiscal math in the state budget. The Budget assumes a nominal GSDP growth of 6.04% in 2026-27, more than a four percentage point fall compared to the 10.36% in 2025-26. This is in contrast to the national trend as inflation is expected to increase in 2026-27 compared to what it has been in 2025-26. In fact, the assumed GDP deflator for all-India GDP growth is almost three percent (10% nominal growth in the budget and 6.8%-7.2% real growth in the Economic Survey). Unless Maharashtra is assuming an exceptionally low real growth or inflation compared to the rest of the country, the nominal growth assumption for 2026-27 does not make sense. To be sure, even the assumed nominal growth of 10% in 2025-26 is significantly higher than the national number which is 8% according to the old series and 8.6% in the new GDP series released last week. What is even more intriguing is the sharp fall in assumed tax buoyancy in the forthcoming fiscal year which, as far as the state’s own tax revenue estimates are concerned, is just 0.24 compared to 1.80 in 2025-26 RE numbers. This is, once again, pretty low compared to the tax buoyancy assumption of 0.80 in the union budget. For a Budget which has exceeded its own expectations of growth, receipts and spending this year, such pessimism going forward is extremely counter-intuitive to put it mildly. Or, it could very well be the case that when the 2027-28 budget is presented next year, 2025-26 actual numbers might end up being lower than what they are in RE data.