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Informist, Tuesday, Mar. 11, 2025

By Shubham Rana

NEW DELHI – Maharashtra's fiscal health is worsening mainly because of the welfare schemes announced in 2024-25 (Apr-Mar), with this year's fiscal deficit seen rising to 2.93% of gross state domestic product, the highest in at least 10 years. The Budget for FY26, presented on Monday, has targetted a fiscal deficit of 2.76% of GSDP for next year.

The state's revenue deficit is seen rising to a five-year high of 0.93% of GSDP in FY26. The revised Budget estimate for the current year's revenue deficit is 0.59% of GSDP.

The state's internal debt, which includes borrowing from the market, is seen at INR 880.28 billion in FY26, largely unchanged from the current year. Maharashtra's debt stock is seen increasing to 18.87% of GSDP in FY26 from 18.52% this year. Interest payments are projected to jump 18.2% on year in FY26 to INR 646.59 billion.

The main reason behind the worsening fiscal metrics is the number of welfare schemes announced by the state government in the FY25 Budget. One such welfare scheme was the 'Ladki Bahin Yojna', under which the government provides INR 1,500 per month to eligible women aged between 21 and 60 years.

"Around 2.53 crores (25.3 million) women have been receiving financial benefits under the 'Mukhyamantri Mazi Ladki Bahin Scheme' since July 2024," Deputy Chief Minister Ajit Pawar, who holds the finance portfolio, said in his Budget speech on Monday. "An expenditure of Rs 33,232 crores (INR 332.32 billion) has been incurred for this purpose. An outlay of Rs 36,000 crores (INR 360 billion) is proposed for this scheme in the fiscal year 2025-26," Pawar said.

The state's revenue expenditure for FY26 has been pegged at INR 6.07 trillion, 7.8% higher than the revised estimate of INR 5.63 trillion for the current year. Total expenditure is seen rising to INR 7.00 trillion in FY26 from the revised estimate of INR 6.72 trillion for FY25.

Capital expenditure, on the other hand, has been reduced in the Budget. The state's capital expenditure for FY26 is pegged at INR 931.66 billion, 14.6% lower than the current year's revised estimate of INR 1.09 trillion.

Even as the capital expenditure allocation has been lowered for next year, Pawar announced several new projects in his speech, most notably a third airport for Mumbai. The third Mumbai airport and the Mumbai-Ahmedabad bullet train station will be established near the Vadhavan Port.

"When one rupee gets invested in infrastructural development, the gross state domestic product increases by INR 2.5 to INR 3.5," Pawar said. "The government is determined to make unprecedented investments in aviation, railways, metro, highways, water transport, port development, irrigation, energy, transport and communication sectors in the next five years."

The state government will also announce a new industrial policy for 2025 soon, Pawar said, adding that the policy aims to attract investments worth INR 40 trillion and create 5 million jobs in its five-year period.

HIGHER VEHICLE TAXES

Pawar's Budget raised taxes for certain vehicle categories in order to offset some of the fiscal strain arising from the welfare schemes. The Budget proposed to raise the motor vehicle tax on individual-owned non-transport four-wheeler compressed natural gas and liquefied petroleum gas vehicles by 1%. Currently, motor vehicle tax is levied at 7% to 9% on such vehicles depending on the vehicle type and price.

This increase in the motor vehicle tax rate is expected to generate additional revenue of around INR 1.5 billion for the state in FY26, Pawar said. The state government has also proposed to levy motor vehicle tax at 6% on electric vehicles priced above INR 3 million.

The Budget also raised the maximum limit of motor vehicle tax to INR 3 million from INR 2 million. This, Pawar said, would lead to additional revenue of around INR 1.7 billion in FY26.

The revenue receipts of the state are seen rising 4.6% on year to INR 5.61 trillion in FY26. The state's own tax revenue for FY26 was pegged at INR 3.88 trillion, against the revised estimate of INR 3.67 trillion for the current year.  End

Edited by Avishek Dutta

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