Devendra Fadnavis is handing over a healthy balance sheet to Uddhav Thackeray but fresh challenges are emerging
In terms of debt, fiscal deficit and overall Gross Domestic Product contribution to the national income, Maharashtra is a well-performing state compared with other major states.
Maharashtra has mostly maintained the fiscal deficit as the percentage of GSDP is within the stipulated limits recommended by the Fourteenth Finance Commission till now
The state needs to revamp its agriculture sector policies to ensure the farmer gets the right price for his produce and making the right technology accessible to overcome seasonal adversities
The new government will have to boost its industrial policies targeting private sector entrepreneurs to accommodate skilled workers
In relation to the numbers of comparable major states, outgoing chief minister Devendra Fadnavis is handing over a relatively healthy state economy to Uddhav Thackeray. Thackeray, the new chief minister, emerged victorious in the ugly power play of Maharashtra, nearly a month after the election outcome, backed by the Sena-NCP-Congress alliance.
In terms of debt, fiscal deficit and overall Gross Domestic Product (GDP) contribution to the national income, Maharashtra is a well-performing state compared with other major states. According to state economic survey 2018-19, Maharashtra's fiscal deficit for the year 2018 stood at 1.8 percent as a percentage of the Gross State Domestic Product (GSDP).
This is the second-lowest fiscal deficit figure among major states after Gujarat, which had a fiscal deficit of 1.7 percent. In 2018-19, the state’s fiscal deficit stood at 2.1 percent of GSDP well within the fiscal limit of 2.7 percent of the GSDP set by the Fourteenth Finance Commission.
The fiscal deficit is the difference between revenue earned and money expended and is an important indicator of the health of that particular economy. Maharashtra has mostly maintained the fiscal deficit as the percentage of the GSDP is within the stipulated limits recommended by the Fourteenth Finance Commission till now.
The state has a healthy distribution of resources as well. During 2018-19 revised estimates (RE), of the total development expenditure on social services, share of general education is 41.0 percent, followed by welfare of scheduled caste, scheduled tribes, other backward classes and minorities with 12.0 percent, medical services and public health with share 10.5 percent whereas share of agriculture and allied activities is the highest (37.2 percent) in economic services.
Similarly, as per 2018-19 (RE), the debt stock of the state is Rs 4.14 lakh crore or 15.6 percent of GSDP, well within the limit (22.3 percent) laid down by the Fourteenth Finance Commission. The average cost of borrowing is 8.4 percent during 2018-19 (RE). The liabilities (debt stock) of the state comprise of accumulated unpaid loans. Also, the average cost of borrowings of Maharashtra has come down over years to 8.4 percent in the fiscal year 2019 from 9.1 percent in fiscal year 2018.
As per the advance estimates, Maharashtra's economy is expected to grow by 7.5 percent during 2018-19 with the crucial ‘agriculture and allied activities’ sector is expected to grow by 0.4 percent during 2018-19 due to less rainfall (73.6 percent of the normal monsoon). During 2018-19, ‘industry’ and ‘services’ sectors are expected to grow by 6.9 percent and 9.2 percent respectively.
The state’s contribution to all India nominal GDP is the highest at 14.4 percent. Nominal GSDP is expected to increase by Rs 2,48,718 crore during 2018-19 as compared to 2017-1. Per capita income during 2018-19 is expected at Rs 1,91,827 as against Rs 1,76,102 during 2017-18 (higher by 8.9 percent). These numbers need to be seen in the backdrop of falling national GDP growth that is expected to fall below 5 percent in the second quarter.
Economic challenges for Sena-NCP-Congress alliance
Having said, there are major economic challenges awaiting the alliance of Shiv Sena, Nationalist Congress Party (NCP) and Congress from day one. Of these, the biggest will be addressing the crisis that has gripped Maharashtra’s rural economy. Repeating unseasonal rains and drought conditions in many parts of the state have impacted the income patterns of its farmers.
In his three-day stint as chief minister in the second term, Fadnavis sanctioned over Rs 5,000 crore from the relief fund to aid the farmers but the alliance government will have to think through a longer roadmap to revive the state’s crisis-ridden agriculture sector. Merely relying on farm loan waivers won’t be enough. The state needs to revamp its agriculture sector policies to ensure the farmer gets the right price for his produce and making the right technology accessible to overcome seasonal adversities.
Secondly, the unemployment situation is alarming. Maharashtra being one of the most developed states in the country is home to millions of migrant workers. The new government will have to boost its industrial policies targeting private sector entrepreneurs to accommodate skilled workers. On the other hand, there will be huge pressure on the Sena-led government for job-reservations from the local job aspirants. Between quota politics and state’s economic development, the Sena-NCP-Congress alliance will have a tightrope walk. The economic survey reminds the government of the need to encouraging job creators rather than job seekers.
Although Maharashtra has better economic indicators seen against the national economy figures, the ongoing economic slowdown is sure to pose fresh challenges to the new government. The common minimum programme of the alliance, which is yet to be worked out, will be watched closely for cues.
(Data support by Kishor Kadam)
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