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Maharashtra’s 2019-20 Fiscal Deficit Seen At Rs 90,000 Crore

Fiscal deficit is the difference between total revenue (or income) of the government in comparison to the total expenditure.

Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai. (Photographer Dhiraj Singh/Bloomberg)
Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai. (Photographer Dhiraj Singh/Bloomberg)

Maharashtra, one of the richest states in the country, is staring at over Rs 90,000-crore fiscal deficit by the end of current fiscal, said an official on Thursday.

Fiscal deficit is the difference between total revenue (or income) of the government in comparison to the total expenditure.

The state government estimated that fiscal deficit as on Dec. 31, 2019, was around Rs 95,000 crore, which is expected to come down (to around Rs 90,000 crore by March) as the new administration has indicated imposing several cuts in expenditure and daily expenses, the official said.

The Shiv Sena-Nationalist Congress Party-Congress government took charge on Nov. 28.

The revenue deficit for the current fiscal is estimated to be around Rs 43,000 crore, he said.

Revenue deficit arises when the government's revenue expenditure exceeds the total revenue receipts.

"If the state does not act in time, it will lead to liquidity crunch and the scope for capital expenditure will narrow down further," said the official from the state finance ministry.

Asked about the Centre releasing its share of Goods and Services Tax refunds to the state, the official said, "There had been some cases of fraudulent claims for refunds from certain businessmen and firms.

"The Centre has now taken a tough stand on its verification, but it has slowed down the refund payment system and almost all the states are at receiving end, including Maharashtra."

"There are plans to introduce some cuts on expenditure. The new government is hopeful of containing it from growing further," the official said.

The Uddhav Thackeray-led Maharashtra Vikas Aghadi government sent a letter to the Centre last month, requesting for release of the state's share of GST dues worth Rs 15,558 crore.

In the recent portfolio allocation, Deputy Chief Minister Ajit Pawar was given finance and planning departments.

Jayant Patil, water resources minister who represented Maharashtra in the GST Council meeting held in Delhi last month, has blamed the rising fiscal and revenue deficits to previous government's "exorbitant expenditure" made without understanding the financial situation of the state.

Till all the portfolios were allocated a few days ago, Patil served as finance minister for almost the entire month of December.

Patil has said the previous Devendra Fadnavis-led government had placed supplementary demands of thousands of crores last year before the Oct. 21 Assembly elections.

"The supplementary demands have increased the deficits of the state on all fronts. We will have to undertake several cuts to keep them under control," Patil said last week.

Another government official pointed out that the widening gap between revenue and expenditure will further impact the state's growth.

"If we go by internal reports, the ratio of capital expenditure has been 11 to 12 percent of the total state expenditure from 2012 to 2017.”

"Capital expenditure is always seen as productive spending, which results in wealth generation. Rest of the expenditure is non-productive spending which consists of repayment of the interest on loans and various subsidy components," the second official said.

"If fiscal deficit continues to widen, then there will be little money left for capital expenditure. How will the state provide services and facilities to people and business houses that generate wealth?" he asked.

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