Maha govt unable to raise debt?

Even though the increasing public debt in Maharashtra is a cause for concern, the actual or audited figures of state borrowings from 2014-15 to 2018-19 suggest that

Even though the increasing public debt in Maharashtra is a cause for concern, the actual or audited figures of state borrowings from 2014-15 to 2018-19 suggest that the state government is unable to raise the estimated debt it requires to fund its additional expenditure or create assets.

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The state budget tabled last week showed that the public debt is likely to touch ₹5.20 lakh crore by next March. The debt to gross state domestic product (GSDP) ratio is within the fiscal prudence norms of below 25 per cent (16.4 per cent), but the state is not raising borrowings as estimated and what is being raised may not be utilised for development.

The actual figures of borrowings (from budget documents) in these four years reveal that the state government could raise ₹1.43 lakh crore as against the estimated debt of ₹1.86 lakh crore. That is ₹43,470 crore less than what had been estimated or proposed initially.

While the reduced debt size sounds like good news for the state, cut in borrowing also leads to a cut in the development spending for the state.

“When the state plans to borrow a certain sum and can’t access it, the lack of funds also leads to a cut in department spendings. Because in such cases, expenditure on seventh pay commission burden for instance or debt servicing which cannot be slashed will get priority, but development spending on a scheme or project faces a cut,” said Rupesh Kir, co-ordinator for organization, Samarthan, which analyses the state budget documents.

A look at the budget figures of these four years show that barring 2016-17, when the government actually borrowed a little more (₹38,667 crore) as against an estimated ₹35,047 crore, in the rest of the years, it could not raise the estimated funds.

In 2017-18 and 2018-19, the finance department officials got their estimates wrong by 40 to 52 per cent.

For instance, in 2018-19, the government had estimated to borrow ₹50,686 crore, but actually borrowed only ₹23,957 crore (52.73 per cent less). In 2017-18, the government estimated to borrow ₹38,892 crore, but actually borrowed ₹23,303 crore.

Every year, when the budget is tabled it comes with budget estimates or allocations expected at the beginning of the financial year. These estimates are updated mid-year to arrive at revised estimates; actuals refer to actual numbers at the end of the year. For instance, the state budget documents for 2020-21 had budget estimates for this fiscal, revised estimates for 2019-20 and actuals for 2018-19.

The state government had estimated to borrow ₹78,223 crore in 2019-20 and is looking to borrow ₹54,721 crore this year.

“It is true that our debt estimates have not been actualised. In some cases, we have averred additional borrowing to keep check on fiscal deficit. Often there is also gap between what was envisioned at the beginning of the fiscal and what could be achieved by the end of it. This doesn’t mean the state is not in a position to raise money,” said a finance department official.

He, however, admitted that given the stress on the state exchequer, especially since 2017-18, with the farm loan waiver and the 7th pay commission, besides reduced revenue targets, the government had implemented 20 per cent cut on development spending.

Samarthan analysis of sector-wise spendings, for instance, shows that from 2015-16 to 2018-19, there had been a cut of ₹21,981 crore in government spending with the maximum impact falling on the social sector spending.